Buggy PC Software Is Botching Tax Returns
By Joan E. Rigdon
The Wall Street Journal
(Copyright (c) 1995, Dow Jones & Co., Inc.)
The estimated three million Americans who will use PC software to
prepare their tax returns this year had better double check the programs'
Mike and Jackie Hulme wish they had. The San Jose, Calif., couple used
a program called TurboTax for their 1992 tax returns. TurboTax
erroneously and quietly gave them a capital-gains deduction against state
taxes, Mr. Hulme says. Last October, state tax officials broke the bad
news: The Hulmes, since divorced, owed $8,500 in back taxes and about
$1,000 in interest.
"What use . . . is a tax-preparation program which makes worse
mathematical errors than I could produce unassisted?" Ms. Hulme asks.
It's a question many more PC users will be asking following Intuit Inc.'s
disclosure Wednesday that the current version of its tax programs,
including TurboTax and MacInTax, have bugs that can botch returns and
possibly force some taxpayers to file amended returns. Intuit Chairman
Scott Cook issued a long apology yesterday, promising to fix the bugs
and pay resulting penalties and interest.
But thousands have already sent off 1994 returns calculated on Intuit and
other flawed software. And like the Hulmes, some taxpayers may not find
out about glitches until years later, in an audit.
Bugs aren't the only problem. Consumers are bombarding software
companies' help desks and on-line forums with angry complaints about
damaged disks, late shipments of final versions of software, cryptic
instructions and hard-to-reach support desks. Eric Herr, an underwriter
for a Transamerica Corp. unit in Dallas, claims he called Intuit 100 times
before getting through to complain about a software mistake that caused
the IRS to reject his electronically filed return.
A bigger aggravation: In the case of Intuit, it knew about at least one bug,
in its MacInTax product, since late December, but kept shipping the
product anyway without warning customers. When importing data from
Intuit's Quicken and other financial software, the bug drops every 30th
item in a list. The No. 1 seller of tax software "shipped copies of a
product that they knew was flawed," says Oakland, Calif., sculptor Bruce
Beasley, who first publicized the bug. "This is shocking."
It wasn't until the San Francisco Chronicle reported the bug Wednesday
that Intuit responded. Mr. Cook says that was a big mistake. "It is still
inexplicable to me how our internal company procedures broke down,"
he says. From now on, he promises, Intuit will respond immediately to
serious bugs instead of waiting for enough fixes to issue an updated
version, as most software companies do. "That's not good enough in tax
software," Mr. Cooks says.
As Intel Corp. learned from the flaw in its Pentium chip, even minor
glitches will raise customers' hackles. But watch out when glitches hit
them in the wallet. "There's some major screaming going on" among
users, says Bruce Brown, editor of BugNet, a newsletter that tracks
No wonder: In cases of underpayment, says an IRS spokesman, "you're
still going to owe the tax and interest" even if software made the mistake.
Of course, people make mistakes on their tax returns even when they do
them by hand. The IRS estimates that those who file taxes manually are
10 times more likely to make errors than those who file electronically --
whether the returns are prepared with or without software. Still, "just
because you crank out a return, and it's neatly printed does not mean that
you don't have to review that return," says San Francisco tax attorney
Neal H. Konami. "You're still signing that return under penalty of
Glitches in some programs don't corrupt data, but rob the program of its
advantages. For example, H&R Block Inc.'s TaxCut '94 for DOS makes
it difficult to compare 1994 returns with 1993 returns. By end of business
Friday, Block says it will post on-line instructions on how to avoid the
Joe Simpson, a software programmer for Research Triangle Institute near
Durham, N.C., tried to use Simply Tax from Computer Associates
International Inc. this year. But when he tried to file his returns
electronically, Simply Tax crashed. Mr. Simpson decided instead to have
Simply Tax print a 1040PC form, which the IRS can scan by computer.
After entering his data, he printed the return; then the software warned
him that he couldn't file the form because it wasn't yet approved by the
When Mr. Simpson called to complain, Computer Associates promised
him a new disk. It never arrived, so Mr. Simpson demanded his money
back. The final rub: The check would arrive in six weeks. Mr. Simpson
still hasn't filed his taxes. "They're still sitting here. I'm going to do it on
paper," he says.
George Kafkarkou, general manager of Computer Associates' 4Home
Productions division, which makes Simply Taxes, says he is "very
unhappy" with his company's treatment of Mr. Simpson and will issue the
refund immediately. "We won't rest until we have every single user
happy," he says.
Intuit swears that it now has the same attitude. After yesterday's
disclosures, it said it would mail new versions of the flawed products to
users who request them and has opened a toll-free hotline for the update.
But some users are still steamed about Intuit's delay. Ray Lubow, a San
Jose, Calif., circuit design engineer, says he told Intuit's help desk about
the MacInTax bug on Jan. 17, more than two weeks after Intuit says it
received its first complaint. He says the help desk told him that Intuit had
no fix, and that he should manually re-enter data. Mr. Lubow says Intuit
declined his suggestion that it warn other users. "They said, `You don't
expect us to send out millions of updates to everyone, do you?'" Mr.
Mr. Cook says simply: "Mr. Lubow is correct."
As for Mr. and Mrs. Hulme, who had trouble with their 1992 taxes, Intuit
will change its policy: Where its software is at fault, it will now pay
interest on back taxes, as well as penalties, which are rarer because they
are punishment for fraud, not for mistakes. Intuit previously only
guaranteed it would pay penalties. It says it paid less than $1,500 under
its penalty guarantee over three years.
Mr. Hulme, an executive for Zilog Inc., a Campbell, Calif., chip-making
concern, plans to have an accountant do his 1994 taxes. While he had
used TurboTax for five years, he says, "I'm not even touching it this year."
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