Frequently Asked Questions

About Us, Our Services and IRS Audit Procedure

Listed below, are some of the most commonly asked questions.

IRS NOTICES of AUDIT and TAX IDENTITY THEFT

What if I receive an AUDIT NOTICE or letter from the IRS or my state tax agency?

First, read the notice. Note to whom the notice is addressed.

If you are a member of one of our Audit Defense Memberships, you can report your notice to us on this website REPORT AN AUDIT. DO NOT call the IRS.

If you would like to get a preliminary idea of what your notice is about, go to Understanding Your Audit Letter.

How fast should I contact you?

If you are a member of one of our Audit Defense Memberships, contact us within five (5) days of receiving the notice because the IRS takes procedural advantage of deadlines and will use your delay against you. If you wait too long, you will harm our ability to help you, and ultimately, you may harm the outcome of your audit whether or not you were ultimately right or wrong about the original audit issue.

What if I receive an NOTICE of TAX IDENTITY THEFT from the IRS or my state tax agency?

First, read the notice. Note to whom the notice is addressed.

If you are a member of one of our Tax Identity Recovery Memberships, you can report your notice to us on this website REPORT TAX IDENTITY THEFT.

If you would like to get a preliminary idea of what your notice is about, go to Understanding Your Notice of Tax Identity Theft.

How fast should I contact you?

If you are a member of one of our Tax Identity Recovery Memberships, the faster you call us, the faster we can revalidate your tax account, assuring that you receive your refund(s) or that your tax payments are properly credited to your account to avoid inappropriate accrual of interest and penalties.

AUDIT DEFENSE

Which Audit Defense Membership Should I Buy?

We offer several Memberships that are designed to fit your individual and small business needs. Generally, they differ in terms of how many tax returns are covered for how many years.

Can I Purchase an Audit Defense Membership After I Receive an Audit Notice?

You can only purchase a tax audit defense membership BEFORE you receive any kind of audit notice. The simplest membership covers one year's tax return for as long as that tax return is subject to audit, generally three (3) years for a federal tax return and four (4) years for a state income tax return from the date filed. The next step up covers all of your filed tax returns for all of the years that are still "open," that is, all years for which they are still subject to being audited. Compare our Audit Defense Memberships.

How much does Tax Audit Defense service cost?

If the tax return that is being audited is covered under an Audit Defense Membership that you purchased before you received an audit notice, there is nothing additional to pay. If you are purchasing a plan under a monthly payment arrangement, you must be current in your payments to be covered.

Why shouldn't I rely completely on my accountant to help me with my income tax audit?

Practice before the Examination (Audit) Division of the IRS is a very specialized, narrow practice that very few accountants do day in and day out. For our audit defense teams, it is ALL they do. Our audit defense teams see, and defend, more income tax audits in a month than your accountant is likely to see, or defend, in his or her professional career.

The IRS is calling. What do I do?

If you have an Audit Defense Membership, report your notice to us on this site within five (5) days of receipt. We will tell the IRS that we are representing you. If the IRS calls again, tell them we are representing you and to refer all questions to us. (You have that legal right.)

Why do I have to sign a Power of Attorney?

In order to represent you in connection with your tax matter, taxing authorities require your express written authorization indicating that you are appointing us to represent you for specific tax matters and tax years. This is for your protection.

TAX IDENTITY RECOVERY

What do I do if I receive a letter from IRS that income was reported by an employer I do not recognize and additional tax is due?

This is a warning sign that identify theft may have occurred. Contact us immediately.

I attempted to e-file my return and it was rejected because someone already filed using my Social Security number. What do I do?

Tax identify fraud has been committed and you should contact us immediately.

The IRS/State income tax authority is requesting information from me through email. Can you handle this for me?

IRS will never initiate contact with taxpayers by email or any type of electronic communication to request personal or financial information. They will communicate with you through U.S. mail.

How many Tax Identity Recovery Memberships do you offer?

We offer one "White Glove" tax identity recovery membership plan. It is the best in the industry. You don't pay extra to "monitor" and wait for a problem to happen; you just pay one low fixed price and you are covered fully if tax identity theft does happen.

Can I Purchase Tax Identity Recovery Membership After I Receive a Notice that my tax identity has been stolen or that my tax account has been corrupted fraudulently?

You can only purchase a tax identity recovery membership BEFORE you receive any kind of notice. The membership covers one year starting on the date of purchase.

How much does Tax Identity Recovery service cost?

If it is within one year of the time you purchased a tax identity recovery plan, you are covered. There is nothing additional to pay. If you are purchasing a plan under a monthly payment arrangement, you must be current in your payments to be covered.

Why shouldn't I rely completely on my accountant to help me with my tax identity recovery?

Recovering, revalidating and recovering tax identities is a very specialized, narrow practice that very few accountants do day in and day out. For our tax identity recovery teams, it is ALL they do. Our tax identity recovery teams see, and revalidate, more income tax accounts in a month than your accountant is likely to see, or defend, in his or her professional career.

Why do I have to sign a Power of Attorney?

In order to represent you in connection with your tax matter, taxing authorities require your express written authorization indicating that you are appointing us to represent you for specific tax matters and tax years. This is for your protection.

MEMBERSHIP QUESTIONS

How can you provide professional income tax audit defense services with competent, experienced professionals for such a low, fixed cost?

By creating cooperative Memberships that are sold to groups of taxpayers, the funds paid in by the group pays for the full cost of the professional defense of those Members who are audited. It is not "too good to be true." It is simply made possible by the intelligent use of economy of scale and efficient workflow systems focused on a highly specialized area for the benefit of all Members protected by one of our audit defense memberships.

For what years will you be offering tax audit defense and tax identity recovery memberships?

For all taxpayers who have not yet received an audit notice, or notice of identity theft, we will be offering memberships indefinitely into the future.

What do you mean some audit defense plans cover all "Open Tax Years"?

An "open tax year" relates to any tax year for which a taxpayer has filed a tax return that can still be questioned by federal or state income tax authorities. The IRS generally has 3 years (statute of limitations), from the date of filing, to audit your income tax return. However, once the audit door is open, if the IRS determines that you underreported your income by 25% or more they can go back 6 (six) years. If the IRS detects that fraud (Tax evasion) is involved they can go as far back as they like! The concept of the "open tax year" for state income tax agencies generally encompasses four years historically.

Do you review my tax return before you accept my membership?

No.

Do you have a "satisfaction guarantee"?

Yes, you may cancel any of our memberships appropriate for purchase before you receive an audit or tax identity theft notice, respectively, for any reason within 30 days of purchase for a full refund.

Do you cover businesses?

Yes, if your business is private (not publicly-traded) and has gross receipts of less than $5 million and fewer than 10 owners (in any form). However, each tax-paying entity that you wish to cover must buy its own membership.

How long will you defend my tax return against audit?

For all "open tax years" on all covered memberships.

Can I buy a tax audit defense membership if I filed my tax return late?

No.

If I filed an extension, may I buy the least expensive basic membership?

Yes, as long as your tax return is filed timely, including extensions, you can buy any of our memberships eligible for purchase BEFORE you have received an audit notice.

What happens if I amended my tax return after its deadline and THEN it gets audited?

If you first filed your tax return on time, including extensions, it is eligible for tax audit services whether or not you subsequently amended it.

When can I buy a Tax Identity Recovery membership plan?

Any time before you receive a notice from an income tax authority indicating possible or certain tax identity theft. You are entitled to tax identity recovery services for a one year period starting on the date of purchase.

What kind of tax returns can be covered by an audit defense membership?
  • Individual - Form 1040
  • Individual - Form 1040
  • S-Corporation - Form 1120S
  • Partnership - Form 1065
  • Limited Liability Company (LLC) - Form 1065
  • Fiduciary - Form 1041
Does it make any difference what my "filing status" is regarding purchasing, and being covered by, a tax audit defense membership?

No. It does not matter whether you file as any of the following: single, married filing a joint return, married filing a separate return, head of household, and qualifying widow(er) with dependent child. All filing statuses are protected under an Individual Membership.

GENERAL QUESTIONS

What form of payment do you accept?

We accept American Express, MasterCard, Visa, and Discover credit cards. We can also make arrangements for payments by ACH, check or money order.

How do you keep my tax information private?

As a member of one of our Audit Defense or Tax Identity Recovery Memberships, your name, address, and any other personal information will not be disclosed or sold to anyone else. Only our professional staff and Technical staff will have access to your tax information. View our Security and Privacy policy for more information.

What Internet Browsers does your website support?

We support newer versions of Internet Explorer, Firefox, Safari, and Chrome. Other browsers may work on our website, but you may have trouble with the display and/or functionality of the site.

Introduction to IRS/State Income Tax Audits

What is an Income Tax Audit?
Why Are Some Income Tax Returns Audited?
How Are Audits Conducted?
What is the IRS/State Looking For?

What is an Income Tax Audit?

When the IRS or your state income tax authority contacts you via letter, notice or telephone call and asks you one or more questions about a tax return that you have filed, they are "auditing" you. In other words, you may not even be aware that you are being audited! Generally, the tax agency is evaluating whether you accurately reported how much money you made (your income); how much you spent (your expenses or deductions) and whether you qualify for, or properly computed, credits on your tax return. As part of this contact, the IRS or State tax authority may ask you about the records you used in preparing your tax return and they may ask to see those records, either requesting that you mail them copies or present them in an in-person meeting. This can be a very emotional, intrusive and invasive exercise, and to avoid worsening the economic consequences, you should handle an audit with due care.

Handling a tax audit yourself is like going to court without a lawyer. That "nice" engaging IRS agent sitting across the table from you, or on the other end of the telephone, will be asking you very innocent sounding questions. They generally ask about 54 interview questions. How you answer them will dictate in which direction the audit will proceed. The IRS uses these questions to build their case against you. They want you to incriminate yourself. The IRS is focused on one thing: to assess and collect more tax from you. Period.

Did you know that nearly half of the referrals to the IRS's criminal investigation division (CID) come from that "nice" person handling your examination?

Why Are Some Income Tax Returns Audited?

The IRS accepts most tax returns as filed. However, the IRS audits/questions some returns to determine if income, expenses and credits are being reported accurately. If your tax return is selected for audit, it does not mean that you made an error or are dishonest. Returns are audited for a variety of reasons:

How Are Audits Conducted?

The audit may take place in any of several ways:

What is the IRS/State Looking For?

Examples:

Your Rights as a US Taxpayer

The National Taxpayer Advocate in Washington, D.C., heads up the IRS's Taxpayer Advocacy Services Division and reports directly to Congress. The National Taxpayer Advocate cannot be fired by the Commissioner of the IRS.

A report, issued by the National Taxpayer Advocate in 2012, urges Congress to codify a Taxpayer Bill of Rights that would clearly list the major rights and responsibilities of taxpayers. "The U.S. tax system is based on a social contract between the government and its taxpayers," the Advocate wrote. "Taxpayers agree to report and pay the taxes they owe and the government agrees to provide the service and oversight necessary to ensure that taxpayers can and will do so."

Every US taxpayer has the right to professional representation in a tax audit. This means, that at any time during the course of an audit, the taxpayer can interrupt and stop the IRS agent conducting the exam and state that they are going to obtain representation. Once this is proclaimed by the taxpayer, the taxpayer no longer has a legal obligation to continue the dialogue with the revenue agent (see IRS Pub. 1 and 594).

Most Taxpayers Don't Know Their Rights

Over the past two decades, Congress has enacted three significant taxpayer rights' bills, but the number of bills and the lack of publicity have muddled the message. In a recent taxpayer survey, 55 percent of the respondents said they did not believe they had rights before the IRS, and 61 percent did not know what their rights are.

10 Taxpayer Rights

The National Taxpayer Advocate's report recommends that Congress organize taxpayer rights under the following ten broad principles:

  1. Right to be informed
  2. Right to be assisted
  3. Right to be heard
  4. Right to pay no more than the correct amount of tax
  5. Right of appeal
  6. Right to certainty
  7. Right to privacy
  8. Right to confidentiality
  9. Right to representation
  10. Right to a fair and just tax system

Introduction to Tax Identity Theft

What is Tax Identity Theft?
What Damage Does Tax Identity Theft Cause to Me?
How Can I Prevent Tax Identity Theft?
What is the Advantage of Purchasing a Tax Identity Theft from TAD, versus Trying to Resolve the Problem Myself?

What is Tax Identity Theft?

Your social security number is the key to your "tax identity." With that one number, and just a few more pieces of identifying data that are usually in plain view, like first and last name, it is possible to "invent" a tax return with your name on it. The recipe followed by the fraudster is too simple: Fill in the identifying data, social security number, first and last name, make up the rest – except the address. Make the address be the one where the bogus refund check should be sent. Then make up some numbers, and have the arithmetic show that a "refund" is due. File the tax return online, and either ask for the refund to be sent to the address of choice, or credited to a brand new debit card. This happened thousands of times last year. Some fraudsters even hosted "tax filing" parties where people got together and created false tax returns in a group like a quilting bee, sharing the proceeds of their fraud on the backs of honest taxpayers – like you.

What Damage Does Tax Identity Theft Cause to Me?

Your actual tax refund does not get delivered to you, or your tax payments do not credited to your account, triggering interest and penalties. The IRS now doesn't know "you" are "you." You will need to spend costly time navigating the taxing authority's bureaucracy in order to prove to them who you are and get your real information processed.

How Can I Prevent Tax Identity Theft?

The steps you take to prevent tax identity theft are the same steps you take to prevent the unauthorized disclosure of any of your personal identification data. Among other things, be very careful to whom you give our social security number, and frequently change your passwords to any account where your social security number is stored.

What Is the Advantage of Purchasing a Tax Identity Theft from TAD, Versus Trying to Resolve the Problem Myself?

TAD's Tax Identity Recovery Membership plan provides a full-service, comprehensive fix from beginning-to-end solution in the event you should fall victim to tax identity theft for a very low fixed price if you purchase the plan BEFORE the IRS or State sends any kind of notice to you of a return already having been filed under your name or indication of tax identity theft. Learn More [link to "How We Help You" – Tax Identity Recovery] Briefly, if you are a TAD Tax Identity Recovery plan member, if your tax identity is stolen, our IRS Enrolled Agents, and if necessary tax attorneys, will: