Video: How TurboTax Protects You from an IRS Audit

TurboTax promises 100% accurate calculations, or it will pay your IRS penalties, offering a fair amount of peace of mind. It’s good to know that your return will be accurate, but the chance of an audit still remains. We hope we’ve also shown you that tax preparation doesn’t have to be a hassle. With so many free and affordable tax software programs out there, it’s easier to find one that suits your needs. Determining how likely it is that you’ll be audited depends on your situation.

You’d have to renew your membership again in 2020 if you wanted the same protection for that year’s returns. The statute of limitations for the IRS to audit a tax return is typically three years; if you had audit defense for your 2021 tax return and you’re audited in 2023, you will be covered. Millions of people come back to TurboTax year after year because they can easily and successfully file their tax return. If you follow the directions provided and enter the numbers on your income forms correctly, you should end up with accurate taxes just as if you went to a more expensive professional tax preparer.

How do I find my audit risk on TurboTax?

Although it offers various products to cater to users’ requirements, the free version is only applicable for basic tax returns. For those with simple returns, TurboTax offers a Free Edition covering both federal and state filing. However, for those with more complex needs or substantial deductions, consulting a professional is often the best route to ensure thoroughness and accuracy.

• Unless otherwise stated, each offer is not available in combination with any other TurboTax offers.
• It has a 100% accuracy guarantee and promises to help you get the fastest refund possible.
• But given that’s where TurboTax’s defense ends, you might be better off dealing with an unlikely audit with a tax attorney—if that time ever comes.
• Certain discount offers may not be valid for mobile in-app purchases and may be available only for a limited period of time.
• Contrasting the benefits and the costs of TurboTax Audit Defense can help you determine if this service is worth the cost.
• Both categories historically are fertile grounds for fraud and – because of the greater complexity – mistakes in data entry.

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Certain discount offers may not be valid for mobile in-app purchases and may be available only for a limited period of time. The IRS has some resources to search for and understand your notice, along with information to set up a payment plan. You must add MAX to your TurboTax package before you finish your return, however.

• If you’re in that “unlikely” category, there might be better places to spend that $59.
• The odds of a millionaire being audited were only just above one percent.
• TurboTax Audit Defense primarily benefits those with simple returns, as individuals with more complex filings—such as business owners or investors—may need specialized representation.
• As you might imagine, prices increase from the Basic to the Premier plan.
• TurboTax MAX’s worth comes down to how much you’re concerned about being audited.

TurboTax audit support

More complicated returns require priced plans, especially if you have to append several additional forms, called “Schedules,” to your return. Instances where you might need to do this include getting married, having kids, buying a house, purchasing or earning income from a rental property, as well as foreign earned income. Research shows that those fears may be unfounded, especially given how many millionaires were audited back in 2022 (for 2021’s taxes). The odds of a millionaire being audited were only just above one percent.

TurboTax MAX is an optional add-on package that TurboTax users can access. MAX offers a number of benefits and personalized assistance to users after they file their taxes. The Audit Rate Is Typically Even Lower for Most Taxpayers Indeed, for most taxpayers, the chance of being audited is even less than 0.6%. For taxpayers who earn $25,000 to $200,000, the audit rate was 0.4%—that’s only one in 250. In addition, TurboTax Audit Defense includes identity theft protection, loss insurance, and restoration assistance.

Itemizing deductions in itself does not increase the chances of being audited. Most basic tax returns with less than $200,000 in income and without any business or investment income have a 0.3% chance of being audited, or 3 out of every 1,000 tax returns are audited. The TurboTax MAX package includes audit defense, identity theft monitoring, restoration support, and loss insurance. If the IRS selects your return for an audit, a TurboTax representative will guide you through the process and help you respond to IRS requests. However, experiences with TurboTax’s audit support vary widely, as the service provides only limited audit representation.

Self-Employed Tax Deductions Calculator

As a physician, a couple of those audit red flags might apply to you—particularly the sole proprietorship and being a high earner. If you feel nervous about your income, portfolio earnings, your medical practice, etc., you might want to consider implementing some sort of audit protection. However, if you’re currently earning a more modest income, if you aren’t running your own practice, and if your deductions are relatively standard, you’re unlikely to face an audit.

Get unlimited advice, an expert final review, and your maximum refund, guaranteed with TurboTax Live Assisted Basic. To discover just how much The White Coat Investor can help you in your financial journey, start here to read some of our most popular posts and to see everything else WCI has to offer. And make sure to sign up for our newsletters to keep up with our newest content. The biggest difference between the free service and Audit Defense is having someone to represent you in dealing with the IRS.

Before that looming deadline (or deadlines if you file your taxes quarterly) hits, you must have all of your financial documents in order so that your tax return is as accurate as possible. Software programs like TurboTax, including its TurboTax MAX package, allow you to file your taxes online with expert guidance if needed. On Jan. 24, 1986, the IRS received its first electronically filed tax return from a preparer. By 1990, taxpayers throughout the country who expected a refund could file electronically. Out of over 155 million individual tax returns received by the IRS in 2018, 138 million were e-filed. The IRS maintains that filing returns electronically can prevent mistakes and lower the odds of an audit.

What’s Included in TurboTax MAX?

Since 2010, the number of IRS audits has dropped by nearly half, as the audit rate slipped from 0.93% to 0.39% in 2019. The largest pool of filers – which consists of individuals or joint filers who earned less than $200,000 but more than the lowest earners – tends to avoid overt scrutiny. TurboTax Audit Defense, an optional add-on through TurboTax MAX (around $60), aims to protect users in the event of an IRS audit. Should you be audited, TurboTax will assign a representative to assist with the audit process and help manage communication with the IRS.

Unusual or unrealistic itemized deductions, either for individuals or small business owners, may raise a red flag for auditors. For example, claiming a charitable tax deduction for 40% of your total income could raise some eyebrows at the IRS. You’re more likely to be audited if you make more than $1 million a year or you’re in a very low income tax bracket. Both categories historically are fertile grounds for fraud and – because turbo tax audit protection of the greater complexity – mistakes in data entry.

We’ll ask you simple questions about your tax situation and search over 350 tax deductions and credits to help you make sure you get all the tax breaks you deserve. While audits are rare, most Americans would probably like to avoid them altogether. The percentage of people who actually are audited is extremely small, according to the Internal Revenue Service, but the number has risen slowly since 2008. If the IRS does decide to audit you, there is little you may do to stop it. You may, however, reduce the odds that you will be singled out for that extra attention in the first place.