After a less than stellar experience trying to sell less product for the same price, Intuit is taking a new tack this year – it is offering a feature called Audit Defence that QuickTax users can optionally purchase (at a cost of $39.99 per return) when preparing their taxes. According to Intuit, QuickTax users who purchase Audit Defence can avail the help of an experienced tax professional who will deal with the CRA in the event a taxpayer is audited.

QuickTax users will be faced with two questions this year: (1) Should they consider buying Audit Defence? (2) Assuming a taxpayer likes the idea of not having to face CRA alone, can they obtain representation cheaper elsewhere?

The type of users who do their own taxes will typically have very simple tax situations – they have one or two T4s, some RRSP contributions, childcare expenses, charitable donations, dividend and interest income and perhaps a small home-based business – and presumably doesn’t involve a deep understanding of the tax code. In these cases, an “audit” is usually nothing more than the CRA checking to see if they actually have the receipts. For instance, recently my wife’s tax return was selected for review. CRA wanted to see receipts to support her claim for child care expenses, which is a relatively straightforward affair and in my opinion, doesn’t justify paying for expert representation.

Some taxpayers would still rather not face the CRA by themselves, which is understandable considering the awesome power the tax agency wields. They may want to check out the new kid in the block: H&R Block is now selling desktop and web-based tax software for the same price as QuickTax Standard but it looks like they throw in a similar feature called Audit Assistance for free.

Also new this year in QuickTax: a pension income optimizer to take advantage of the new rules that allow seniors couples to split pension income. To my knowledge, UFile was the only software that included an optimizer last year.

Now that QuickTax has increased the number of returns, would you consider going back? Have you been audited by the CRA? If so, what was your experience like? What is your take on Audit Defence? Is it, as Michael James wondered in a recent post, similar to extended warranties sold by retailers? Is this another instance where it is cheaper to self-insure (i.e. hire expert representation after the CRA sends an audit notice)?

[Edit: The original post incorrectly referred to QuickTax 2007. It has now been corrected]

This article has 33 comments

  1. Most of the personal tax ‘audits’ I see in my accounting practice are as CC suggests – CRA does sample reviews of efiled returns and asks to see the supporting information, such as charitable donation or medical expense receipts.

    If you are the DIY type (which you probably are if you are filing your own tax returns), I don’t think ‘Audit Defence’ is the way to go. The first place I would direct people with tax questions is to CRA’s own website, where they have a searchable database of their guides, interpretation bulletins and so on.

  2. I got Quicktax last year but returned it and got GenuTax instead. It was my first year filing a tax return on my own and it was no problem. Best of all I get this year’s tax update for free, so I’ll stick with them.

    Honestly I think Intuit is an undeserving market leader. They are more concerned about profits then serving customers. They make crummy software and take every opportunity to gouge customers for more money.

  3. My neighbour thinks insurance should be for “big” stuff. Like fire, flooded basement, theft, etc. Something as trifling as dealing with the CRA wouldn’t qualify. I agree with my neighbour.

    I agree with your points that most people have simple tax returns not likely to be audited and that audit insurance is like a “gotcha” extended warranty.

  4. Thanks for the mention, CC. I tend to be skeptical of all insurance products, but I’ll wait until more details of what taxpayers actually get from Audit Defence before I make up my mind.

    Gene’s point about insurance being for big stuff makes sense to me.

  5. I’ve used Quicktax for a few years now, and while I wasn’t happy with the reduction in number of returns last, still went with it last year and again this year. I’m used to the interface now. Could be open to trying another software, if the reviews are good.
    We’ve only been audited once – asking for receipts for my wife’s monthly public transit passes. Simple matter to mail them in, etc, and not worth $40 for Audit Defense. It seems to me that the various softwares have to be certified by the CRA in order to be sold, so it’s unlikely to be an error in the software that catches you. It’s more likely to be a complex tax arrangement that the user inadequately inputs or describes in the software that would cause grief. Chances are that if your taxes are that complicated, you either know what you are doing, and won’t have a problem entering the data correctly and/or representing yourself in case of an audit, or don’t know what you are doing and are likely to skip the software entirely and enlist the help of an H&R Block to begin with.
    I really can’t see a case where one is better off with the audit insurance.

  6. My wife & I have a tax situation that is almost exactly what was described in this post: A couple of T4’s, RRSP contributions, charitable donations, investment income, and some income from a home business.

    I used StudioTax last year to file our taxes. I got ‘audited’ and was asked to send in hard copies of our charitable donation receipts to prove that we had made them. It was pretty straightforward. I don’t think I’d pay for that kind of feature. If my taxes were more complicated I would consider it, but if that were the case I’d probably just get a professional accountant to handle it for me.

  7. I have been “audited” twice by CRA. Both times were due to moving expenses I claimed (ie realty, travel, etc.) when changing cities for jobs. They requested all documentation and receipts. The request came by mail in about November time. I submitted all receipts and calculations and had no problems. I would therefore recommend to anyone who is moving that they DO keep copies of everything because my experience is that you WILL be asked to show proof.

  8. What a scam. What could QuickTax possibly do for you?

    CRA: Please provide proof of by sending us the receipt.
    You: HELP ME QuickTax!
    QuickTax: Please send to the CRA.
    You: Thanks for explaining that QuickTax!
    *rampant sarcasm*

  9. Bah. Can’t use the triangle brackets apparently. It should read:

    CRA: Please provide proof of (insert subject here) by sending us the receipt.
    You: HELP ME QuickTax!
    QuickTax: Please send (insert receipt name here) to the CRA.
    You: Thanks for explaining that QuickTax!

  10. I’ve been audited four times and, once, I’ve had to pay more (because I managed to lose a receipt for moving expenses in between filing and the audit, they didn’t take the photocopied VISA bill as proof). Every year that I’ve submitted my taxes on paper, I’ve never been audited … it’s only with QuickTax/EasyTax that I’ve ever had them asking me questions about “sending in the receipts”.

    If you’re doing something risky, such as claim part of your home as your office as a business expense for the first time this year, I can see why you might want to purchase this. However, why haven’t you got your ducks in a row and got tax advice from an accountant long before this? If you have a standard tax form (RRSPs, medical expenses, child care, T4s, investment gains/losses), an “audit” involves a big envelope and a stamp to send the receipts in.

    The Intuit employee who commented on Michael James’ entry claimed 20% of people are fearful of an audit. If you’re going to spend $40 on insurance, why not spend it on improving your disability insurance (something WORTH worrying about)?

    Having said all of this, this is the one year in my life that I am more likely to be audited than any other year (due to a gambling windfall). My accountant’s fees are my insurance that everything has been filed correctly, and I’m actually looking forward to a fight with the CRA on the contentious topic. 🙂

  11. I think audit defence might still be useful for some people, but I think it should be way cheaper, like maybe $1.99, not $40

  12. MarkB: I’m interested in the tax implications of gambling windfalls. In Canada, lottery winnings are tax-free. Are you concerned that CRA might deem you a professional gambler and try to tax your winnings as income? Or maybe CRA might deem your activities as of questionable legality and try to tax your gains as proceeds of illegal activities? I’m just taking wild guesses here. Are you interested in telling us more?

  13. I was audited 3 years back in regards to rental income and what I was writing off against it. They wanted statements for all my accounts for 2 years, as well as, supporting receipts for all of my write offs. Really they just wanted to ensure I was properly allocation capital expenses vs operating expenses etc… Intuit wouldn’t have been able to assist me.

    My summary, it’s a waste of $. CRA will deal with YOU and ask YOU for the information they require. It is pretty much a game of send CRA the documents requested.

  14. Sure thing … it was a large cash in a poker tournament while in the United States. Of course, I had to pay 30% withholding to the IRS (most of which I won’t be able to get back, because I can only offset gambling losses against wins). However, I did bring back the remainder of the money via wire transfer, so a transfer of that size should have put me on someone’s radar.

    Now, because I am resolute in my assertion that I am an amateur poker player and that I don’t play poker with an “expectation of profit”, this should be classified as a “windfall”. I don’t run the tournament circuit, I have a full-time job that I actually took vacation from to participate in this tournament … and this tournament was quite outside my (or anyone else’s) wildest expectations.

    There has yet to be a CRA case appealed to generate a binding ruling regarding poker players and/or tournament poker, so it is difficult to tell whether they assert that poker is a game of skill with some luck components, or whether it is a game of chance with some skill components. Even if they claim it is largely a game of skill, I feel I don’t meet any of the other criteria for whether I am in the business of gambling.

    I relish the fight here because the US tax can offset any Canadian tax owed (if I am judged to pay Canadian tax). So, by comparison to some other players, my net exposure is low, and I’m highly confident that I’m right in not paying and am interested in taking on the CRA in a case that would set precedents for whether other Canadian poker players are required to pay tax on their wins or not.

    Canadian Online Poker Tax Thread on the 2+2 forums actually has all sorts of good details about the relevant case law and information as it is uncovered.

  15. MarkB: Thanks for the explanation and congratulations on the poker victory. I enjoy poker myself, but my net winnings are very modest at this point. I’ll look for the thread in the 2+2 forums. I’ll be interested to see how your case works out.

  16. I’ve used Quicktax for five years, except last year. I thought the reduction in returns was a blatant money grab so I left for StudioTax (free). StudioTax was great but I admit that Quicktax has a great interface for people who don’t like accounting and taxes in general. I’m rewarding the behaviour that is positive for the community and returning to Quicktax this year (knowing I can leave it at any time is great! hopefully Intuit recognizes that people are finding alternates now!)
    I think the audit defense is great for people who worry and want cheap peace of mind, but it is very similar to an extended warranty at any retailer these days — highly unlikely you’ll get any value out of it! I think they should be applauded for increasing the base features and gaining profit from optional features, not forcing it on the consumer. I appreciate the fact that I can get a good base product without *having* to pay for the extras.

  17. Gardiner Westbound

    I switched to UFile last year because QuickTax jumped in price. So far Intuit has sent emails soliciting my renewal and a mailing containing a 2008 QuickTax CD. I have already purchased UFile 2008. The QuickTax CD will make a dandy coaster!

  18. Gardiner Westbound: I actually do use CDs as coasters — they work great. I used to tell people that I belonged to AOL’s coaster of the month club.

  19. Those who cheat will pay during an audit with or without QTs help. Those who do not have nothing to worry about. This does not apply to those with complex tax situtions who should only use tax prep software if they are in the know at which point the same applies.

  20. I also have used QuickTax for the past few years. Last year I was audited on whether or not I was reimbursed for my moving expense by my employer and like the one poster above I lost a receipt between filing and auditing (November) and so I was on the hook for a hundred bucks (and they didn’t accept my Amex bill as proof either). That is basically a worst case scenario, I don’t see how an audit assit would help in that (or any) situation.

  21. I left Quicktax last year due to their greediness in reducing the number of returns and also for my purpose, I would have had to buy the platinum version at $69. Even though I liked Quicktax when I was using it, I went to UFile and quickly adapted to it. It also performed the income splitting last year which in many of the returns I filed for couples, made a significant difference. (Income splitting is new is new to Quicktax only this year). I wonder how many taxpayers would have benefited through income splitting and didn’t because they trusted Quicktax. I would encourage couples to go back and recalculate 2007 returns to see if they can take advantage of this benefit and file an amendment.

    I really don’t think being asked for a hard copy of a receipt or T-slip should be considered an audit. These would have been sent in anyway if a paper return was filed. If one is not trying to get away with anything an “audit” or any request from CRA should not be of any concern.

    I would be wary of a the “audit defense” Quicktax claims to provide. What does the small print say? I’m sure they would not be there do argue a case on my behalf for $40. Not that I would need them to.

    I also received the Quicktax CD in the mail welcoming me back and boasting that now I could file 8 returns. (They certainly heard from me last year!) At first I thought it was a complimentary CD to draw me back to Quicktax and even then, I decided I would not use it. Then I read the brochure and realized they were just trying saving me a trip to the store where I could be tempted to buy another program. Their arrogance once again evident. I am sticking with UFile and highly recommend it. Let’s hope they don’t go the way of Quicktax.

    The Quicktax CD went straight into the trash. Had I read these posts earlier, I would now have a coaster!

    Note to Intuit: Your sneaky marketing schemes will not work with me. I hold a grudge!

  22. “Audit defence” sounds just like another attempt at money-grabbing to me – just what we expect from Intuit. I was audited similarly to Adam re rental income, and I don’t see how Intuit have helped with that, or anything similar. If it’s just a case of sending in documentation to support a netfiled return, hardly an audit, you do it yourself. Just be sure to keep copies of everything! they do lose things. One year I had to file a paper return (because a glitch in the QT software decided I was ineligible to netfile), and I took all my stuff, including about a hundred donation receipts, in to the tax office myself, to be safe. But somehow CRA managed to lose those receipts, and so assessed me for more taxes, despite my protests that it was all their fault. I had neglected to make copies, so I had to spend ages phoning around, often to head offices back East, to get replacements. A lesson learned.

  23. I just read the fine print… ” * Not available for QuickTax Business Incorporated
    * Not available for residents of the Province of Quebec
    * Does not include GST/HST reviews and other non-income tax audits or reviews (unless the issues are linked to the income tax review itself)
    * Does not include a “detailed financial audit”

    So it is just for sending in receipts…yippeee

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  25. I used to use Quick Tax but changed to FutureTax last year because of the changes in their pricing it was quite a bit cheaper. $ 7.00 for one return and $ 9.00 for 2 I think. This year it is even cheaper and more options. Customer support was great for last year, they even got back to me by email in an hour or two when I had a problem. If you feel that you need audit insurance and are willing to pay the price then go for it but read the fine print.

    My wife and I had T4’s T4A(OAS), T4A(p) several T5’s, Rental income and several charitable donations

    Regards

    Gibson

  26. we got audited for adoption expenses …. it was no problem to gather the expenses and send them in. i use quick tax and my husband an accountant. we ended up having to pay because we claimed the adoption expenses in the wrong year …. that was thanks to the accountant .. needless to say we are moving off the accountant. anyone know a good accountant for good price.

  27. anyone else using Futuretax …. what did you think? can you have a small business and still use it?

  28. Hi – I found this thread on a search for “tax audit advice”. I’m being audited for employment expenses. I’m VERY clueless about tax so I don’t do my own taxes – my FA does. I have some support for my expenses but not to the extent they are asking. I don’t know where to go for advice as my FA seems to want to cover their own butt on this…. I’m wondering if the folks who have been audited have sought legal counsel or other?? I’m not currently employed so cost is a concern
    thanks
    very naive….

  29. frances,
    Without receipts, there can be no deductions. Your FA will be busy explaining to CRA the reasons they had for completing a tax return based on incomplete documentation. You should be planning how you will finance the repayment, reflecting on how you got yourself in your current situation, and determining the steps to ensure you are not in a similar situation in the future.

    Though polite, the CRA guys have little sense of Ha-ha.

    DAvid

  30. I got to admit that last year was one time wherein reviews and feedback on QuickTax 2007 really took its beating because of a lowering of tax return support. Even if it really did not have any effect on my needed provisioning, I could understand the plight of many others who were affected by the downsizing and needed to resort to other means. With that being said, I appreciate that this year they have increased their support for other tax filing variants.

    Hopefully, their support would be consistently increasing and never be decreased anymore to avoid any other disgruntled customers from pulling it down in terms of evaluation.

  31. Thanks DAvid for your reply to my audit query.
    I’m definitely going to do what’s necessary to clear this up. I’d like to explain it to the CRA agent directly but I’m worried that I’ll say something stupid, hence my question on whether I need an expert to speak on my behalf.
    anyone have any advice on discussing desk audit questions with the CRA auditor directly?
    thanks
    (apologies for the detour from QuickTax)

  32. Gardiner Westbound

    Methinks “Tim Whiteman” is a ringer.

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