Knock, Knock
Should the IRS come calling, your welcome mat had better read `insured.'
Does the thought of an IRS audit send chills down your spine?
Unexpected unpaid taxes compounded by interest and penalties can
play havoc with any entrepreneur's budget. Even the cost of
defending yourself at an audit--whether or not additional taxes are
assessed--can be significant. But a new insurance product can
protect individuals and sole proprietors from the expenses related
to an audit.
Audit Protection Insurance Services Inc. (API) of Santa Rosa,
California, has developed an insurance policy that pays the
additional taxes and interest brought on by audits, as well as the
cost of representation by a tax professional, up to a designated
limit. If you file a Schedule C, premiums start at $236 for $3,000
in coverage and go up to $486 for as much as $10,000 in coverage.
Tax returns are covered for four years--one year longer than the
period covered by the IRS' statute of limitations for audits.
Of course, the policy doesn't cover fraud--so you aren't
protected if you lie on your return and get caught.
Currently, audit protection insurance is available in California
for professionally prepared individual tax returns, with or without
a Schedule C. Coverage will be extended next year to personally
prepared individual returns, and will expand to nationwide in
2001.
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If you're not eligible for audit protection coverage this
year because you have a troubled audit history or your tax returns
aren't professionally prepared (next year, both personally and
professionally prepared documents will be eligible), you can opt
for API's IRS representation service, which is currently
available nationwide for both personally and professionally
prepared returns. For $195 per year, API will pre-audit your return
prior to filing and represent you with the IRS should you be
audited. This doesn't cover taxes or penalties, however. Both
products can be purchased at http://www.audit-protection.com