9

If I pay an accountant to prepare my taxes, and then I'm audited, is it typical for the accountant to handle the audit as part of the original filing fee, or will he/she charge me by the hour to deal with the audit?

I understand there's probably variance between accounting firms, but I'm wondering what the most common case is?

  • 1
    There are different kinds of audits. See this related question and its answers for some details. The accountant's fee probably includes some level of representation in case of an audit but, as duffbeer703 points out, it is in case of their errors, not for other matters (e.g. income you forgot to tell the accountant about). – Dilip Sarwate Mar 12 '12 at 15:02
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    In my experience, accountants usually specify the details for this in their terms of service/contract. You might want to check that to see if it's explained there. – Mike B Mar 12 '12 at 21:40
  • Remember that most audits are minor things. If you can show documents to support your numbers, and aren't pushing at or past the edges of the rules, they're as likely to find something in your favor as against you. The one time I was audited they saved me a huge chunk of money by pointing out that I hadn't claimed (paper) losses I'd taken when a mutual fund changed which index it was tracking and did a massive sell-and-rebuy transition. – keshlam Oct 10 '14 at 2:40
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With the big nationwide firms (H&R Block, Jackson Hewitt, etc), they typically guarantee against calculation errors. If you are audited as a result of their error, they will pay the associated fines and interest, as well as provide you with some sort of representation for the audit.

If you get audited for some other reason, you typically don't get any gratuitous services.

  • 1
    I don't think "gratuitous" means what you think it means. Unless that was deliberate. (Fine answer, just a quibble with the wording.) – keshlam Oct 10 '14 at 2:34
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    @keshlam "Gratuitous" is used correctly here, in that it basically means given freely even though not strictly necessary or required. While often it takes the connotation of "unwanted" or even "inappropriate" (as with violence or nudity) in addition to its base meaning, this interpretation of wanted-vs-unwanted is gratuitous (err...) - this is just a result of how the word is often used, and not what the word means in all contexts. "you typically don't get extra services added free of charge" = "you don't typically get any gratuitous services" – BrianH Oct 10 '14 at 18:25
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I'm a CPA, and I would charge by the hour for audit defense unless the audit is due to my error. The way I view it is that I don't want a client to knowingly give me bad/incomplete information and then expect to hide behind the fact that I signed the return. I'm here to help clients, not be a fig leaf. But then again, most "audits" I get involved in usually just require a letter of explanation to the IRS, usually stating somewhere "correct as originally filed", and they usually end up with no adjustment. (That's the bonus of doing it right, and not playing the audit lottery.)

5

Normally no, unless the audit was caused by their errors. Some companies may offer free audit assistance as part of their package. H & R Block does this in Canada if you use their tax filing software.

1

A lot of the big firms and software programs also offer an additional audit "insurance" TurboTax audit defense is a good example.

http://turbotax.intuit.com/support/iq/Audit-Protection/What-is-Audit-Defense-/GEN12590.html

I would guess that any independent accountant would offer something like that as well. If they don't offer it, I might consider looking for another accountant if that was important to me.

1

As an accountant, I have to agree with ExpatTaxCPA. If we made the error, our office fixes it free, and even covers the penalty at times (not the interest). If it's due to something the taxpayer failed to give us, or something they misrepresented, it's only fair to charge them for the audit work done.

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protected by Chris W. Rea Nov 1 '17 at 2:51

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