Reminder: check the math when using tax software

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grabiner
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Reminder: check the math when using tax software

Post by grabiner »

Tax software is much less likely than most taxpayers to get a calculation wrong, but it still happens, so you should check the final printouts (and report bugs or override calculations if necessary). In particular, I would expect more bugs in state tax forms, because there are 44 different forms to handle and thus less opportunity to check everything.

I have now found two bugs in TaxACT (both affecting only NJ part-year residents). I caught one while entering numbers for a calculation, but the second was not related to numbers I entered, and I only caught it because I checked my part-year resident return before signing and filing it.

A side benefit of checking the math is that you can find your own errors, if something was entered in the wrong place. I had an income item which was earned while I was a resident of Maryland, and I discovered that I had mistakenly entered it on my New Jersey forms as also having been earned while I was a resident of New Jersey.
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SSSS
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Post by SSSS »

Tell me about it...

TaxCut:

Image

TaxAct:

Image

TurboTax:

Image
btenny
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Post by btenny »

Which one gave you the correct tax amount?

Bill
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Post by Chuck »

So you're saying TaxAct is the best tax software? :)
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Post by SSSS »

btenny wrote:Which one gave you the correct tax amount?
TaxCut (or H&R Whatever They Call It Now) was correct.

TurboTax was originally correct but then they implemented a rather massive bug (while trying to fix something else, I'm sure) which they then fixed a couple weeks later. I wish the bugged state return had actually been true, because it claimed I had 250 times as much income as I actually did.

With TaxAct I couldn't get it to transfer my Roth conversion income to state, but once I entered it manually in the state return, it matched the others.
Last edited by SSSS on Tue Mar 15, 2011 12:52 pm, edited 1 time in total.
Chuck
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Post by Chuck »

I would be surprised if any tax software gets all 43 states right. Can you imagine the scope of that effort in addition to all the federal complications?
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Post by sscritic »

Those were not the actual numbers on the return, which is the subject of this thread. Show us the actual tax on the correct line of your AR return. I don't believe that any of them showed a tax due of $1.5 million on the actual return.
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Post by SSSS »

sscritic wrote:Show us the actual tax on the correct line of your AR return. I don't believe that any of them showed a tax due of $1.5 million on the actual return.
The TurboTax bug has already been fixed, but yes, for a couple weeks the state return showed 20 million in non-existent income, resulting in the 1.5 million in tax due. This phantom income was somehow derived from a 1099R that was of no actual tax consequence (401k to IRA rollover of about $20K). Deleting the 1099R fixed the state return & re-adding it triggered the bug again. I deleted and added it about 7 different times to ensure I wasn't simply entering something wrong.
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Post by HueyLD »

Frequently such errors are "operator" errors. O.k., tax software does make mistakes, but human error is usually the more likely cause.

Too many people are using tax software w/o having some baseline knowledge of tax laws. One typical mistake I've found is that the operator does not read interview questions all the way to the end. They scan the questions and ignore what they don't understand as "unimportant."
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Post by new2bogle »

HueyLD wrote:They scan the questions and ignore what they don't understand as "unimportant."
People do this for everything.
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Post by paulsiu »

Real errors do exists. I am working with Taxact right not to resolve an issue with section 179. It helps to compare it to your previous year's return. In my case, the red flag was some missing numbers that were on the last year's return.

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Post by mikep »

I found a Taxact problem that they imported my state tax due with last year's return as an estimated payment toward my state tax for this year. Their "alerts" caught it and I fixed it before filing but something to watch for.
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Post by grabiner »

HueyLD wrote:Frequently such errors are "operator" errors. O.k., tax software does make mistakes, but human error is usually the more likely cause.

Too many people are using tax software w/o having some baseline knowledge of tax laws. One typical mistake I've found is that the operator does not read interview questions all the way to the end. They scan the questions and ignore what they don't understand as "unimportant."
I agree, and the software also helps make some of these. If you import data directly from Quicken into TurboTax, without checking the data, you may find that some items were categorized incorrectly in Quicken and transferred to the wrong line. My W-2 rarely matches what Quicken thinks it should be.

But both of mine were documented bugs, confirmed when I reported them to TaxACT. And both apply only to a small number of part-year NJ residents, which is what allows them to slip through in testing and not get caught by users.
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Post by grberry »

I found what I still consider to be a bug with TaxAct, though they didn't agree.

I had dividend income on a pair of form 1099s, each for some dollars and more than 50 but less than 75 cents, with all the dividends qualified dividends. I don't have enough dividend or interest income to have to file schedule B. But the software filled out schedule B anyway, rounding each of those numbers up, then totaled schedule B to fill in the dividend number on the 1040. But to fill in the qualified dividend number, it added the amounts on the forms and rounded down - so it was showing my total and qualified dividends amounts $1 different even though every penny of dividends was qualified. It then carried those amounts forward to multiple places...

The company "explained" that the IRS requires schedule B to e-file, and therefore the software was correct. And if I was going to file a schedule B, it would have been. Since I don't e-file and wasn't going to file schedule B, the software was wrong. The solution for me was easy enough - manually override the total dividends to match the correctly calculated qualified dividends. Not that the fake dollar of income actually affected the tax refund, but I want to get the answer right.
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Re:

Post by grabiner »

grabiner wrote:
HueyLD wrote:Frequently such errors are "operator" errors. O.k., tax software does make mistakes, but human error is usually the more likely cause.

Too many people are using tax software w/o having some baseline knowledge of tax laws. One typical mistake I've found is that the operator does not read interview questions all the way to the end. They scan the questions and ignore what they don't understand as "unimportant."
I agree, and the software also helps make some of these. If you import data directly from Quicken into TurboTax, without checking the data, you may find that some items were categorized incorrectly in Quicken and transferred to the wrong line. My W-2 rarely matches what Quicken thinks it should be.
And you have to check for data-entry errors as well; the software won't find them for you.

I just caught one that was the result of entering numbers incorrectly and having math that didn't check. TaxAct lets you create your own worksheets so that you can match your accounting to lines on the IRS forms. I had one IRS line with a worksheet like, "Recorded total: $2903. Less double-counted amount: $301," and then let TaxAct compute the correct value. However, it added rather than subtracting, leading to an entry of $3204 which should have been $2602. I found the error because TaxAct prints out the scratch worksheets, and I noticed that the "less" was followed by an addition; the number should have been entered as $-301.

But the software is a major convenience when you do find the errors. Correcting one entry and printing out the necessary forms doesn't require you to recalculate everything; you can quickly print out an original return (if you find the error before filing) or an amended return (if you have already filed).
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Re: Reminder: check the math when using tax software

Post by gd »

Reminder: check the dates when viewing forum postings. First thread I look at was started in 2007, the next thread in 2011. Time to go read my paper magazines. Wait, they're all 6 months old! :D
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Re: Reminder: check the math when using tax software

Post by AAA »

For years, I had been doing by hand the non-resident return for the state where I worked - it's just two pages long. Two years ago, I decided to splurge and download TurboTax for that state in addition to my resident state. I noticed it made an entry on a line that I usually left blank. I didn't think much of it and also made an entry there when I again did the return by hand last year. In going through the current return, I read the instructions for that line and it should only have an entry if I were a part-year resident of that state. TT's version ended up costing me more, and I am considering filing amended returns for those two years as I was not a resident of that state at any time during the two years in question. TT knew I was a full-year resident of my resident state so why it did that is a mystery.

So yeah, it's nice to have software to handle the nitty-gritty, but some checking is in order.

BTW, I've been using H&R Block's software this year and last. It doesn't have a non-resident return for that state so I don't know what it would have done.
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Re: Reminder: check the math when using tax software

Post by grabiner »

AAA wrote:For years, I had been doing by hand the non-resident return for the state where I worked - it's just two pages long. Two years ago, I decided to splurge and download TurboTax for that state in addition to my resident state. I noticed it made an entry on a line that I usually left blank. I didn't think much of it and also made an entry there when I again did the return by hand last year. In going through the current return, I read the instructions for that line and it should only have an entry if I were a part-year resident of that state. TT's version ended up costing me more, and I am considering filing amended returns for those two years as I was not a resident of that state at any time during the two years in question. TT knew I was a full-year resident of my resident state so why it did that is a mystery.
It is possible to be a resident of more than one state for tax purposes. For example, in many states, if you maintain a home in the state and spend 183 days there, you are a resident even if your permanent home is elsewhere; this is common for out-of-state students who rent apartments. TurboTax probably asked you about residency, but you missed or misunderstood the question.

And check the return of your resident state as well. The states give a credit for double-taxed income, so if you paid too much tax to your nonresident state, you may have gotten too much of a credit in your resident state.
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Re: Reminder: check the math when using tax software

Post by AAA »

grabiner wrote:
AAA wrote:... TurboTax probably asked you about residency, but you missed or misunderstood the question...

And check the return of your resident state as well. The states give a credit for double-taxed income, so if you paid too much tax to your nonresident state, you may have gotten too much of a credit in your resident state.
It's always possible that I made a mistake, but I'm pretty sure I indicated to TT that I was a full-year resident of my state. It seemed to have handled tax-exempt income correctly for my resident state, fully excluding such income sourced in my state and not excluding income sourced elsewhere. Besides, the incorrect entry in my non-resident return should have been apportioned based on the number of days I was (supposedly) a resident of that state but TT put the full 1040 line 8b tax-exempt interest amount there. So unless I am missing something, it seems to have made a mistake.

And it didn't result in too much credit on my resident return as that credit is based on the lesser of the actual amount of tax paid to the non-resident state and the amount of tax the resident state would have imposed on the non-resident state earnings.
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Re: Reminder: check the math when using tax software

Post by ArmchairArchitect »

It's a testament to the overcomplexity of our tax code, when even those at the top of the industry can't get it right.
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Re: Reminder: check the math when using tax software

Post by tinscale »

Besides "mistakes," the problem I've had is not having access to the behind-the-scene calculations to see how a number was arrived at. There were times when I needed one of the intermediate numbers that were generated during a longer calculation, but could not see it. This occurred with 2 of the free versions of software, so I abandoned them and basically do it manually so I know what's going on.
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