Saturday, September 08, 2012

TURBOTAX DEFENSE FAIL

Russell Long, describing tax reform, once said, "Don't tax you, don't tax me.  Tax that fellow behind the tree."

A variation that taxpayers who make mistakes on their tax returns often claim is, “Don’t penalize you, don’t penalize me, it was TurboTax’s fault, so set me free.”

The so-called “TurboTax defense” is raised by taxpayers to avoid penalties – they claim reasonable cause for their tax return errors because they used TurboTax or similar return preparation software to prepare the erroneous tax return. That is what Brenda Bartlett claimed when she was penalized for not reporting all her income on her tax return. Brenda maintained that the failure to report was an honest mistake resulting from her lack of familiarity with the TurboTax program and that she relied on the audit portion of the program to catch any mistakes she made.

The Tax Court rejected her defense, since the problem was that Brenda entered the information incorrectly into the program – not that the program made a mistake. The Court noted:

TurboTax is only as good as the information entered into its software program…Simply put: grabage in, garbage out.

Brenda Frances Bartlett v. Commissioner, T.C. Memo. 2012-254 (Sept. 4, 2012)

Post a Comment