IRS audit insurance is a good idea. A friend in Houston completely overlooked reporting $6000 worth of stock investment income, but had the foresight to purchase Turbo Tax audit defense. Audit defense is effectively insurance against excessive penalties or in some case the all too common IRS errors and mistakes. My friend had to pay the tax on on his $6000 oversight, but the audit defense which he purchased for $45 while filing his income tax return online with TurboTax helped him avoid costly penalties.
Perhaps the most common motivation for purchasing the peace of mind audit defense is to have inexpensive legal representation in the event of a random IRS audit. Random IRS audits are similar to random checkpoint DWI breathalyzer tests which presumably deter drunk driving. Taxpayers are less likely to try and cheat the government if they know their returns could be audited without cause or suspicion of wrong doing.
A common red flag is when filers claim moving expenses. You could get audited because this is a common way people try to scam the IRS even if you have no intention of scamming them! Sometimes it’s very serious and the IRS wants to scrutinize every line of your form. No matter what kind of audit you get, it can be very stressful, intimidating and expensive to deal with IRS face to face without the comfort of knowledgeable tax code attorneys fighting for you .
The moving expense signal to the IRS is only one of many. Inconsistent reporting of the mileage rates you report for the vehicle you use for business related travel will likely trigger an audit. So don’t be a tightwad when considering whether to purchase audit insurance. It is a no brainer!