A new client came in today and mentioned something we hadn't heard of before - Audit insurance.

They said they were leaving their current tax preparer because they were being asked (pressured) to pay between $150 and $250 per year (over that of the tax preparation fee) for "audit insurance", in case they got audited by CRA.

We don't want to mention the Lantzville, BC Canada tax preparer by name, but we felt it is important that taxpayers know that this is price gouging at the extreme.

First off, although this older couple had medical expenses, in the case of this type of audit, the CRA does a "soft" audit. The CRA basically sends the taxpayer a letter asking for the taxpayer to submit supporting documentation to prove the medical expenses claimed. This is easily resolved by uploading scans of the receipts via the taxpayer's CRA account and it takes maybe 5-10 minutes.

Secondly, at no extra charge, we plan for such a "soft" audit by packaging medical receipts with the medical expense summary during the preparation of the return. If that client gets such a letter, they merely bring in the medical receipts "package" back into our office.

Lastly, also included in our tax preparation fee is the service of uploading said receipts.

The tax preparation industry is like any industry in that client abuse can take place, especially when it comes to older individuals who may not know how the system works and are very trusting of people that they feel are in a professional position.

If you ever come across a situation where a professional is asking for a "protection" fee, please contact us for a free consultation.