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.
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