Three Problems With Turbo Tax and How to Fix Them

Day 30 - Working late makes me..

Photo by Phil and Pam Gradwell on flickr.com

First, full disclosure: I love Turbo Tax. I used to tell people that I’d do TV commercials for it. I even seriously considered going to work for the company. I have worked for one of their competitors – and I still like Turbo Tax better. So when I title this blog post as “Problems With Turbo Tax”, you’re not going to find an exposé of all things bad with the company. This is just a heads up for people using the number one tax software in America.

Problem number 1: “The program won’t let me…” This is the one I hear most often, “The program won’t let me change the number, it won’t let me delete my neighbor’s child.” Turbo Tax is great when you’re in the act of preparing your taxes, but it’s not as easy to go back in and make a change if you’ve done something wrong and need to correct it. For example: one of the things I do is review tax returns that people have prepared for themselves before they send them to the IRS. (I charge a fee for that but it’s much cheaper than paying me to do your taxes for you.) One year, I reviewed a woman’s return and she had put a $4,000 tax credit on her return. That was wrong; the $4,000 belonged someplace else. I explained the problem and where the $4,000 needed to go. Granted, she wasn’t going to get that big refund she was expecting, but her return would have been right. Anyway, a few months later she was in my office again. She had received a notice from the IRS stating that she wasn’t allowed to claim that $4,000 tax credit I had warned her about. I asked her, “Why didn’t you change it like I told you to?” “Because Turbo Tax wouldn’t let me,” she said.

Dealing with that problem: First, you need to know that “Turbo Tax wouldn’t let me,” is not an acceptable excuse in Tax Court. Second, one thing that Turbo Tax does well is that they have real people who can answer your questions. You call the phone number and you get to talk to an Enrolled Agent who understands tax issues and the Turbo Tax software. You can tell her you’ve got a number on line 53 but it really belongs on line 29 but you can’t figure out how to make it work and she’ll guide you through it. You might pay a little more for Turbo Tax to get that service, but it’s there when you need it so don’t be afraid to use it.

Problem 2: Choosing the right product. Turbo Tax has 5 versions of its product, plus its online applications. In the store you can buy:

  • Basic – for simple tax returns with no itemized deductions
  • Deluxe – for regular 1040 returns with home mortgage interest and charitable deductions
  • Premier – which includes everything in Deluxe but also handles investment income and rental property
  • Home & Business – which is for sole proprietors
  • Business – for persons filing corporations, partnerships and LLCs

I cannot stress this enough, if you need the more expensive package, don’t be cheap – buy it. I’m always amazed when people call me for help because they want to depreciate their income property by hand because Turbo Tax won’t do it for them. Yes it does, if you buy the Premier edition. Of course I will gladly prepare a depreciation schedule for your property (for a fee), but if you don’t use the correct software when preparing your tax return, there could be other problems that you won’t realize like passive income limitations (sounds like I’m speaking Geek doesn’t it? I am.) The right software will keep you out of trouble. And there’s no excuse for buying the wrong one: go to their web site and do their quiz to determine which package is right for you.

Problem 3: Not updating the program before you e-file. This isn’t a Turbo Tax problem so much as it is a user error. You have to install the updates before you file your tax return or it could easily be wrong. Let’s be realistic about this. Turbo Tax tries to get its product to the shelves by December for customers to buy it. This is a pretty good business plan. The problem is; there’s always some last minute change to the tax code. Last year, Congress changed the tax rules on December 17th. They messed things up so badly that the IRS computers weren’t able to accept certain returns on the normal date. Intuit (the Turbo Tax Company) has to get its product out to the stores in time. The only way for them to get the product to the store shelves and have it work correctly is to have people install the updates to the software before they file their returns. If you didn’t install the update, your return could easily have been wrong. Installing updates is a normal part of doing taxes – I update my professional software almost every day. If you don’t have internet access and cannot install the updates, the box might not be your best option.

Now I wrote about these Turbo Tax issues because these are all problems that I have helped people with because they had filed taxes and there was a problem. If you file a bad return and the IRS sends you a letter, I charge a lot to fix it. All of these problems I mention are preventable. You will save yourself lots of money by buying the right program, updating before you file, and making use of the Turbo Tax 1-800 number provided in your box.

Final disclaimer—if you haven’t already purchased your tax software, let me recommend clicking on the “Do Your Own Taxes” page at the top and take a walk through my 1040.com program. It doesn’t have the famous name recognition, but it is a good, solid program. If it wasn’t, it wouldn’t be on my website.

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116 thoughts on “Three Problems With Turbo Tax and How to Fix Them

  1. Hi Great Responses!

    I am having trouble with an NOL. I had in 2012, thought it was applied in 2013, just went to see if there was anything left for 2014 and realized TT does not support NOLs so they did nothing with it. I used TT Home and Office last 4 years. I had bad years in 2012 and 2013 due to poor health, but I am back in full swing as sole proprietor with a good year in 2014. The 2012 NOL is $6500. Line 41 of 1040 for 2013 was $17500. I got a job in 2012 to get health benefits and kept it all this time so I have additional income and the NOL might have had an affect on 2013. Should I just cut my losses? Try to figure out IRS publication 536? Or hire a professional? I am guessing I might have to ammend 2012 and then the NOL will be used up.

  2. Hi Thomas,
    NOLs can be a little tricky. So the important thing would have been–did you make an election to carry forward the NOL? If you didn’t make an election to do that, and I don’t know if Turbo Tax has that option or not, then you have to carry back the loss two years.
    Here’s the thing–because its past the filing deadline, you can’t go back and elect to carry that loss forward, you have to carry it back. So, you’re not going to amend your 2013, you’re going to amend your 2010.
    Normally, you can amend 2010 because it’s an out of statute year, but since you had an NOL in 2012–which is still in statute, you can do that.
    Is it worth hiring a professional to do this? Well, what’s your tax bracket? At 25%, you’d be saving $1625 so I’d say yes.

  3. I’m so confused. I qualify for EIC because I only made 21,740 last year. I filed both my federal and state taxes with turbo tax I used this last year it was easy and I received refunds for both. This year it says I’m getting nothing for state back. I don’t understand this. It just doesn’t make sence. Now I’m afraid I made a mistake and they will reject my state refund. Will that effect my federal as well. I lost my job and need the Money. It’s going into direct deposit

  4. Hi Patricia,
    It could be any number of things. Most likely, you had less state withholding than last year and didn’t qualify for a refund. But I really don’t know.
    You need to call the Turbo Tax hotline and talk to one of their consultants. They’ll be able to look at your return and explain if it’s just that you didn’t withhold–or it you really did make a mistake.
    One thing I can tell you, your state return should not affect your federal refund. Good luck.

  5. I used Turbo Tax last year to file my Taxes. I had previously done some contract work (for an Internship) and entered deductions for the miles driven for this work.

    This year Turbo Tax is expecting me to enter more information for this contract work (I labeled Internship). It is claiming that I need to enter information for my car that I used for deductions in my contract work last year.

    Is there a reason that it expects information for my previous contract work a even though I made it clear I have no 1099 income?

    Thanks!

  6. Hi Aaron,
    It’s just carrying over information from the prior year If you haven’t done any contract work and aren’t claiming business miles this year, then you’ll just need to delete those pages.

  7. Hi, Jan —

    I read your post while searching the web in an effort to figure out how I handle Rental Income in TT Home & Business. I’m still searching for the answer to that question. However, I noticed that you review individually prepared returns. That’s exactly the kind of support that I need. Where can I get more info?

  8. Hi Doug,
    So I’m several days late on this answer. We were so busy this year I fell behind on the blog questions. In the future, if anyone really needed to reach me, it’s best to call the office. Our contact information is on the contact page. Sorry I missed you.

  9. I download brokerage detail directly to Turbo Tax. The package assumes dividend and interest income is similarly taxable on the Tennessee return as the federal return. This is incorrect. The download function has to be avoided and all data input manually. Is there a way around this? Otherwise the state option is a waste of money.

  10. I e-filed my 2013 TurboTax return with their program, Evidently the IRS did not get it. I found out when I was later planing to amend it. I found out that the payment was not debited from my bank account. I went to the local IRS office an met with a representative. She said there was no trouble with my 2013 tax return.

    I checked with a representative of Schwab Bank. She found that there had been no withdrawals from any of my accounts in the amount to be paid. She found no information on the Routing Transit Number and/or a fund transfer of that amount on the internet.

    I then mailed the IRS a copy of the return I electronically filed and a check for the correct amount.due.

    Up to the date I sent the copy I had not received any letters from the IRS about the failure to file.

    I had many 1099s with interest, royalties, retirement, etc.

    I had kept a copy of the form.

    A short later I started receiving forms indicating penalty and interest due.

    Is my problem common?

    Bill B

  11. Hi Bill,
    You’re definitely not alone, but this isn’t a problem unique to Turbo Tax. It happens all over the place, with all kinds of programs. And there are lots of ways this happens but I can’t tell which one happened to you. It could be that your return was filed and rejected. It could be a glitch in the system that day. It could be that you thought you hit the send button and didn’t. It could be that you hit the send button, but there was something wrong with the return and it wouldn’t transmit. It could even be something that I’ve never even heard of.
    But, you sound like a responsible person who normally files his taxes on time What I would do is contact the IRS and explain the situation. You thought you had filed, and once you discovered the problem you immediately corrected it. (Note: it sounds to me like you fixed it before the IRS caught it.)
    What you’re going to ask them for is a first time “abatement of penalties”. They usually grant that to people who normally file properly but just make a mistake – like you. You thought you had filed, You thought you had paid. The IRS is usually good about dropping the penalties in a case like that. They won’t drop the interest, but since you had the money in your Schwab account all that time, hopefully you were earning some.

  12. Using Business 2014 and trying to file a fiscal year 2014/2015 1041 Estate. I have a home sale in 2015 but TTax gives me an error that the sale date is invalid. It will not let me enter a sale date that is not in 2014. On the 8949 the purchase date shows as the date of acquired instead of the word “INHERITED” . If I try to override, it shifts the whole transaction down one line on the 8949.

  13. Hi JProse,
    Have you entered the fiscal year dates into the system yet? If you don’t have the fiscal dates, the program assumes a calendar year and won’t allow the 2015 dates.
    If you’ve done that, is the sale date after the fiscal year end?
    If you’ve covered all that, then you’ll have to call the Turbo Tax help line.

  14. I recently received a CP2000 for my 2013 tax return. They are saying I owe $4000 due to not claiming my Unemployment Salary ($9,800.00). I did claim it but accidentally combined it with my other income and put it in box 7 (Wages-W2) instead of separating it and putting it in Box 13. I wrote them a letter and faxed it along with all my documentation. I havent heard anything yet. But am I going to end up filing an amendment and will I really owe that much even though all I did was reported the Unemployment wages in the box with regular earnings instead of separating it into Box 13? Thanks

  15. Hi Eric,
    It sounds to me like you did the right thing. You shouldn’t owe additional tax as you’ve already reported it, just on the wrong line. I’d let the IRS process your letter. I think you probably won’t have to amend. You sent them all the information they need.
    If you haven’t heard anything within 8 weeks, give them a call to follow up. (They’ll probably tell you 12 weeks, but I like to check in at 8, just to be safe.)
    Sounds to me like having to amend is your worst case scenario, but I think you won’t even have to do that.

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