Types of audit protection?

[ad_1]

Audit protection is a general phrase for services that help people who are being audited. This is most commonly associated with audits of tax returns, such as those conducted in the United States by the Internal Revenue Service. At the corporate level, an audit may involve evaluating accounts, particularly in a publicly traded company, but “protecting” against an audit is often an inherent part of the company’s accounts department’s job.

The most common, and most feared, type of audit for individuals is the one conducted by the IRS. The audit involves the taxpayer being asked to provide documents as evidence that the particular claims made on the tax filing are correct. About two-thirds of audits are conducted by mail, with the remainder involving an in-person interview.

Audit protection comes in two main forms. The first are services designed to reduce the chances of being audited. The second is services to help people who are being audited.

There are a wide variety of services that claim to reduce the likelihood of an audit. The most expensive involve a tax professional carefully reviewing the filing to look for issues that could trigger an audit. In effect, the professional is conducting a dress rehearsal of an actual audit, albeit without as much stress or fear on the part of the taxpayer. The cheaper services simply claim to offer details of the “secret” list the IRS uses to search for suspicious audits. These services should be viewed with caution, as even if the information available is from a legitimate IRS source, it may still be out of date.

Audit protection services for people already under audit are usually administrative. They primarily involve a tax professional gathering the taxpayer’s documentation, finding what is needed to support the disputed section of the filing, and highlighting any missing documentation. Such professionals can also provide advice on taxpayer rights in the audit process.

Another service offered is audit protection insurance. This is simply an insurance product that involves paying an annual premium that covers the costs of professional services that arise if the policyholder is audited. In some cases, the insurance may be offered by the same company that offers the audit protection services, which means that the client does not have to pay for the services and claim money back. Instead, the company simply provides the services free of charge. Whether such insurance is worth it can be difficult to judge. In addition to looking at potential premiums and costs, the client must consider the likelihood of being audited, which can be very difficult to predict. In 2008, there was about a one percent chance of being audited for Americans who made less than $200,000 a year.

Smart Asset.

[ad_2]