By Joe Dyton, WCI Contributor

Tax time can be stressful. 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. The slightest miscalculation could lead to an inaccurate return, and if a discrepancy is big enough, it could garner the Internal Revenue Service’s (IRS) attention—and you could be facing the dreaded audit. Fortunately, you don’t have to go through tax filing alone. Software programs like TurboTax, including its TurboTax MAX package, allow you to file your taxes online with expert guidance if needed.

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. TurboTax offers coverage there too, through its TurboTax MAX package. You just have to decide if you are willing to pay for that protection.

Let's figure out if TurboTax MAX is worth it for you.


What Is TurboTax MAX?

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.


TurboTax Benefits

For an additional $59, MAX users receive full audit representation, aka its Audit Defense offering. TurboTax will provide you with a dedicated expert who will represent you and handle all communications with the IRS. The company will also develop a plan of action and prepare all IRS documents for you.

Audit Defense activates if the IRS audits you and you notify TurboTax. You must add MAX to your TurboTax package before you finish your return, however.

Non-audit-related MAX benefits include:

  • Identity theft resolution in the event someone files a fraudulent tax return in your name.
  • Priority Care, so you can quickly get in touch with one of TurboTax’s on-staff tax professionals when you call to inquire about your tax return or anything else related to your file.
  • Identity loss insurance, which could offset any direct financial losses (up to $250,000) and legal fees (up to $1 million) that are connected to identity theft.

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What Does TurboTax's Audit Defense Do?

TurboTax's Audit Defense is a step up from its general audit “support.” TurboTax’s Audit Support Guarantee is included with all versions except for TurboTax Business. Users get a free consultation and audit information support to help them understand what’s happening if they receive an audit letter about their return. If the company can’t connect you to a pro, you’ll receive a refund. You will also be shown how to prepare for an audit and will have your audit-related questions answered year-round.

Audit Defense, on the other hand, is a perk from paying for TurboTax’s MAX package. You’ll have the aforementioned full representation by a licensed tax professional during all interactions with the IRS.


How Likely Are You to Get Audited Using TurboTax?

The chances of you being audited will likely determine whether paying for TurboTax MAX is worth it for you. Based on recent data, the odds of you getting audited are low, no matter if you use TurboTax. In 2020, just 0.3% of individual tax returns were audited, though those who earn seven figures per year (or who pay $0 in tax) are about six times more likely to face an audit. If you’re unlikely to be audited without filing your taxes with software, doing so through a service like TurboTax will likely decrease those chances even more.

Since audits are rare, if or when would TurboTax Audit Defense come in handy? Well, audits are rare, but they still occur. Straightforward tax returns, especially those filed through an online tax preparation service, are often the least likely to be audited. That means anyone with an unusual tax return should be wary of a potential audit. Some tax return oddities that might catch the IRS’s eye include:

  • Unrealistic deductions: Claiming a large charitable tax deduction that’s half of your total is likely to get flagged. The same can be said if, as a sole proprietor, you report losses several years in a row. Tax deductions have to be legitimate as well; you can’t claim your daily work commute, for example.
  • Sole proprietorship: Self-employed people have a lot of tax deduction opportunities at their disposal. The IRS might look at a sole proprietor, especially one earning six figures, a little more closely to ensure their deductions are legitimate and that they’ve reported all of their income. Most accountants will tell you that an S Corp is less likely than a sole proprietorship to be audited.
  • Early withdrawals from retirement accounts: Traditional IRAs and 401(k) payouts that occur before the age of 59 ½ are subject to a 10% penalty along with the standard income tax. The IRS is monitoring such payouts closely to make sure that the penalty is being applied to any early distributions.
  • High earners: The higher your income, the better your odds are of being audited, especially if a lot of that income is generated from a business. The IRS might just look at your reported income, but it also could explore any other revenue-generating properties you might have. This enhanced IRS scrutiny is typically applied to people who earn more than $1 million annually.

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.

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How Long Does TurboTax Audit Defense Last?

TurboTax Audit Defense, in partnership with TaxAudit, will defend your covered federal or state income tax audit or notice for the entire process—from the time you receive your first notice until the audit is completed—though it's subject to Audit Defense Plan Limitations and Exclusions. The coverage includes any audit that might occur during the time of your MAX membership (which lasts a year)—an audit representative will take care of all appointment scheduling, phone calls, and correspondence.

Keep in mind that your Audit Defense membership applies to that year’s membership individually. So, if you had Audit Defense for your 2019 return, you’d be covered for that year if you were audited in, say, 2022. 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.

Audit Defense memberships also do not apply for large businesses that have gross receipts of more than $5 million and/or 10 partners, stockholders, beneficiaries, or members.

turbotax max audit defense

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Is TurboTax Audit Defense Worth It?

This is probably not the answer you were looking for, but it depends. Your profession and financial situation will play a key role in your odds of being audited. If you’re working at a hospital or within a practice that someone else owns and are earning a standard salary, spending that extra $59 might not be worth it.

If you’re working for yourself and drawing a significant income, however, it might be worth it to look into some sort of audit protection—especially as you become more of a prime target for the IRS. If it’s TurboTax’s Audit Defense you’re thinking of using, there are a few things to consider first:

  • If you’re using TurboTax to file your taxes, you’re probably in good shape: In other words, you likely have a simpler tax return, which won’t hit the IRS’s radar. But if you have your own practice or a significant investment portfolio, you probably need more help than TurboTax can offer, such as a CPA or tax attorney who could assist you in an audit situation.
  • Audit Defense doesn’t provide legal assistance: Yes, TurboTax’s Audit Defense still steps in on your behalf to deal with the IRS if you’re audited, but if you have to go to tax court? You’ll be paying more money for a tax attorney anyway. Audit Defense also does not prepare or amend your tax returns, handle bookkeeping, organize records, or reconcile checkbooks.

TurboTax MAX’s worth comes down to how much you’re concerned about being audited. If you’re in that “unlikely” category, there might be better places to spend that $59. And remember, TurboTax’s Audit Support Guarantee is free, and you still get one-on-one audit guidance from an experienced tax pro, get your audit-related questions answered for a year, and get guidance on audit preparation.

The biggest difference between the free service and Audit Defense is having someone to represent you in dealing with the IRS. 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.

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