Monday, January 19, 2009

QuickTax Responds to Audit Defence Questions

Last week I wrote about QuickTax’s Audit Defence product where for $40 you get the services of a tax specialist if you get audited by Canada Revenue Agency. Some readers and I had questions about how Audit Defence would work, and Geoff at QuickTax replied with some answers:

“Audit Defence, which is already a popular offering with Intuit’s US TurboTax customers, is designed to offer our Canadian QuickTax customers peace of mind. An independent research firm reported that 20 per cent of Canadians are fearful of an audit. While that might not be you or me, it’s a sizeable part of our population.

“Audit Defence for the 2008 tax year can be purchased directly within QuickTax, and will be available from February onward. Should the QuickTax user be audited or subjected to a CRA review for this tax year, Audit Defence provides full-service representation by a third-party tax specialist. They will review documentation and correspondence, provide counsel, schedule and attend appointments, and help make the audit as painless as possible. While many CRA post-assessments take place over the phone, some are conducted in person. The Audit Defence service covers you in either case. As you note, it’s not available in Quebec, but it is available everywhere else in the country, whether you’re in a big city or a small town. If you were to hire a tax professional yourself to help you through an audit, it could certainly cost you quite a bit more.

“As I noted, Audit Defence is designed as a peace of mind offering, but consider the time savings component of having a professional help prepare you and support you during your meetings with the CRA. From my personal perspective, the free hours I’d lose preparing my information or the time I’d take off work are worth significantly more than the sticker price.”

The critical factors in deciding whether to buy Audit Defence are

1. The probability that you will get audited by CRA.

2. The value of the tax specialist’s help to you if you get audited.

Your chances of getting audited by CRA depend greatly on your situation. My finances are pretty simple, and I’m not concerned about getting audited. Your situation may be different.

The value of a tax specialist’s services depends greatly on how much work this tax specialist will do for you. The first wave of Audit Defence customers will provide some information on this. The third-party tax specialists themselves may be a good source of information on this point as well. Are they given any particular limits on how much time they can spend? Is there an upper bound on how much they get paid by QuickTax? Does the customer have any recourse if he is unhappy with the level of service?

As with any type of insurance, customers have to make a leap of faith that they will be protected in the event of an audit. QuickTax begins with a strong reputation in the software tax preparation business. Some happy first customers for Audit Defence would go a long way toward helping the next set of customers make that leap of faith.

4 comments:

  1. I think the explanation is a little short of detail. Is the tax specialist a lawyer (covered under privilege) or an accountant?

    What happens if the audit goes to Tax Court? Do they cover you there? When you get to tax court, your legal bill is easily $10,000. Would coverage really cover all of that.

    What's the deductibile (if any)? I have never seen insurance without a deductible.

    What about exemptions to coverage?

    I still like to see the terms and conditions.

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  2. Thicken: Excellent questions. If QuickTax doesn't provide them, maybe we'll learn more from the experience of the first taxpayers who pay the $40 and happen to get audited.

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  3. I signed up last year and was audited for my northern allowance. When I contacted the Audit Defense company I ended up talking to an American office somewhere in the states. I had a tough time explaining the person what I was audited for and how to go about it. Waste of my money and my time. Almost missed the deadline to hand in the information. I had to walk the person through the process.

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  4. @Anonymous: Thanks for the information. You are the first Audit Defence user I've heard from. This isn't exactly a ringing endorsement.

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