Help! Could one little mistake on my tax return really cost me $7,800?

By | March 19th, 2017

Robert Henderson decided to prepare his tax return himself rather than pay for professional assistance. But he made a mistake while preparing his return — and he wants Intuit, the maker of TurboTax, to pay for it.

As tax season proceeds, Henderson’s case is a timely reminder of the need to go over your financial information and tax returns extremely carefully before submitting them to the Internal Revenue Service (IRS) and state and local tax agencies.

If you make mistakes on your tax return, the IRS and other tax agencies bill you not only for underpayment of tax but also for accuracy-related penalties and interest — which can be stiff. (Disclosure: I’m a CPA and prepare tax returns for a living. I see this frequently.)

And as Henderson found out the hard way, tax software companies are not liable for your input errors — not even when they offer a “100% Accurate Calculation Guarantee,” as does Intuit with regard to TurboTax.

Henderson purchased TurboTax to prepare his and his wife’s 2014 tax returns. Once he input his financial information into TurboTax, he then used TurboTax’s “Complete Check” feature to review his return. Receiving an indication that “all was well,” Henderson then submitted the return electronically to the IRS.

Except all wasn’t well.

Two years later, Henderson received a notice from the IRS indicating that his returns were incorrect. Henderson had not properly reported his wages from his Form W-2 and omitted some 1099 (non-wage) income from his returns. According to the IRS, he owed $7,800 in underpaid taxes, penalties and interest.

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Henderson assumed that Intuit’s “100% Accurate Calculation Guarantee” meant that Intuit would reimburse him for the IRS’s assessment:

This should be covered under the “100% Guarantee Plan” because of the following:
1. They are claiming the W-2 from Lana Henderson was reported under Robert Henderson (me). The EIN (Employee Identification Number) and social security number on the W-2 clearly indicates that Lana Henderson is the employee filing the taxes.
2. TurboTax software performed a check prior to filing indicating that “All was well”
3. TurboTax sent a notification that the IRS accepted our return.
4. The TurboTax Guarantee covers incorrect filings which is exactly what TurboTax did. They should have notified me that the EIN associated with Lana did not match mine.


According to the 100% Accurate Calculation Guarantee, “If you pay an IRS or state penalty or interest because of a TurboTax calculation error, [Intuit will] pay you the penalty and interest.”

But this guarantee only applies when the software incorrectly computes a tax liability because of a programming error. If the IRS or a state or local tax agency assesses penalties or interest because of errors made by the taxpayer when inputting data, then those amounts are not covered under the guarantee. And the IRS has up to three years from the date your return was due to assess any additional tax.

Intuit turned down Henderson’s request for reimbursement of his penalties and interest, pointing out that they were caused not by programming errors in TurboTax but by Henderson’s input errors. Henderson escalated his request to a vice president of Intuit, who replied:

The TurboTax accuracy guarantee covers situations where the program incorrectly computes tax liability. In your case, TurboTax correctly computed your tax liability based on information you entered. Additionally, TurboTax flagged your wages as a potential error and asked for verification. It’s a potential error because many people have multiple jobs where the income exceeds the social security withholding tax threshold.

Henderson then contacted our advocates to look into his case. (Executive contact information for Intuit is available on our website.)

Our advocates reached out to Intuit, who notified us that its vice president had sent the above response to Henderson. As the TurboTax “100% Accurate Calculation Guarantee” does not apply to his situation because it resulted from his input errors and not programming errors in TurboTax, he will have to pay the additional tax, penalties and interest or convince the IRS that he does not owe them. But we are filing his story in our “Case Dismissed” collection — together with a warning to our readers to review their tax situations with the utmost caution before filing their returns.



  • Bill___A

    Why would he expect Intuit to pay for his mistake? How would they be enen able to stay in business if they did that?

    It is very unfortunate but it is between him and the IRS.

  • PsyGuy

    Some software preps like H&R block for instance guarantee the return for accuracy, etc.

  • Inquirer1111

    I’ve used TurboTax every year except that one when H&R block had a better deal because TurboTax changed features. I’ve never had a problem, but now get nervous. Granted, this person was using TurboTax for the first time, whereas I’m used to using TurboTax every year.

  • Donald Filiault

    Nice try, but it’s absurd to think that the “100% guarantee” applies even when you input inaccurate information.

  • Kairho

    For Jennifer: I know the IRS allows “amended” returns after the fact. Would such a filing apply in this case?

  • PsyGuy

    I wonder if Chris could contact the IRS and advocate and get this fixed, a gesture of goodwill perhaps?

  • Kairho

    But H&R physically examines the source documents (or should) before input.

  • PsyGuy

    Sure the LW could file an amended return. What are they going to amend it to, the IRS is still going to say it’s incorrect.

  • PsyGuy

    I’m referring to the online DIY H&R Block filing.

  • Extramail

    Agreed. Then everybody and his mother could input inaccurate information and claim it was TurboTax’s’ responsibility . . .

  • Mel65

    How could anyone believe that TT guarantees that YOU provided the correct information? It’s obvious they are guaranteeing the accuracy of the calculations conducted on YOUR provided info only. This totally sucks for them, but I’ve used TT for over 15 years, and they flag things as potentially problematic quite often.

  • Mel65

    I can’t see how they can guarantee that you as the consumer provided accurate information. That would be like me guaranteeing that YOU provided the right information on your taxes without seeing your W2’s at all of your information first… That’s just asking for trouble!

  • Mel65

    If you’re careful with what you’re inputting and you’re checking your own accuracy I don’t think you have to be nervous semicolon this guy was not apparently careful enough in ensuring that he inputted information correctly.

  • sirwired

    In cases like this, where the consumer simply did not report income received, nobody will indemnify you against that.

  • sirwired

    This story is a little muddled; it appears that he filed a W-2 under himself instead of “Lana” (his wife? daughter?) and I can see that that would definitely foul things up if they don’t file jointly. I don’t know about TurboTax but H&R@Home doesn’t ask you to input the SSN from the W-2 (again); it simply asks you who the W-2 is for. Garbage In, Garbage out.

    “They should have notified me that the EIN associated with Lana did not match mine.” Huh? The software can’t evaluate that you’ve put the correct EIN in; it knows if it has the right number of digits, but has no access to IRS computers to see if it’s correct.

    And if he left out a 1099 entirely, that’s also not Intuit’s fault.

    It should be noted that even if there is a programming error, they only cover penalties and interest; they don’t pay for the taxes themselves.

  • sirwired

    He can amend, sure. But that won’t make the interest and penalties go away; it merely makes them stop accruing (assuming you pay the tax due.)

  • fshaff

    I’ve used Turbo-Tax for years and never had a problem. One year, I used a paid preparer because I had difficulty figuring out taxes for a move from one state to another. Guess what? He screwed it up and it took me over a year to get it straightened it.

  • Harvey-6-3.5

    As a relevant point, turbotax also allows you to upload w-2 and 1099 information from many sources (though not necessarily the OP’s, of course). This reduces the possibility of incorrect data entry relative to the source information (which is what the IRS is going to compare).

  • sirwired

    The IRS has defined processes for you to work out a payment arrangement, and they will often waive most of the interest and penalties; the IRS website has information all about it.

  • AMA

    Why in the world would Chris do that? The OP is entirely at fault. He filled out his taxes with the wrong information, he signed them, he submitted them, and he’s trying to blame a software program for his mistakes. It would be in the OP’s best interest to hire a tax lawyer if he wants to arrange some sort of payment plan.

  • Evyl Empryss

    Garbage in; garbage out, no software can protect you from that. I use TT and I still go back and check my numbers one last time after it does the error check because the cost of an audit is just too great compared to the extra hour I spend rechecking all my entries.

    On the plus side, Turbo Tax now has (what I think is) a cool feature: they use some sort of database where you enter in the code on your W-2 and it enters in all the information in the right places for you. Unless your W-2 is inherently wrong, or your employer doesn’t participate in that program, it reduces the chances for erroneous entries. Not sure if it works for 1099s, though.

  • Tired_Guy

    Garbage in, garbage out BUT the calculations are 100% right. It’s just the output itself is wrong due to the erroneous data (and missing data, those 1099s) that was input. The guarantee is for cases when the data input is accurate and the program makes a calculation mistake. Then they own it. As someone who has used tax software since ChipSoft first published TurboTax on floppy disks, anyone with a lick of common sense who uses these tools knows to print out a copy of the return and to sit there with your documents and ensure your typing didn’t have mistakes.and that everything was input and it’s in the right place. Maybe twice. It is the IRS you are dealing with. Kind of like “measure twice, cut once”.

  • sirwired

    Well, unfortunately for this particular error, he would not have spotted it on the printed copy of the return, as W-2’s and 1099’s are not enumerated on the return itself. (1099’s just get tabulated, and W-2’s are stapled to the return should you actually mail it.)

  • Tired_Guy

    Well, I wasn’t specific enough but didn’t see the need but to be 100% clear, the two programs I have used (TurboTax and TaxCut) both offer you the opportunity to view/print your data entry forms and worksheets. Those are what you use to find typos and data entry errors. 1099s that you simply didn’t input are simply not going to get caught until the IRS catches them.

  • Carol Molloy

    The IRS is much more reasonable than people commonly believe. However, they are not in the business of accommodating people who make these kinds of mistakes. The accumulation of fines is the price the taxpayer must pay for his original error. He does seem to owe the taxes.

    My son-in-law is a manger at the IRS. They actually do try to be reasonable with people, but they also have enforce the tax laws consistently. Plenty of people have a story about why they didn’t pay there taxes properly. To individually consider every request for consideration would create an unworkable system, given the scale.

    I made a huge error one year on the estate taxes I filed for a trust that I managed. I neglected to subtract that distribution from the estate balance. I received a notice for a stunning tax bill from the IRS. When I called them, and went through the return with them, my mistake came to light. They permitted me to refile without penalty, because in reality, I owed no tax. This gentleman does owe taxes, so , regrettably, the penalty applies.

  • cscasi

    I have used TurboTax since 2004 and never had an issue. I do double and triple check my inputs. I do not have a hard (lengthy) return to do. We have pensions and get 1099Rs for them, have some investments that require reporting dividends, long and short term gains, etc. But, my TurboTax Deluxe has not failed us yet. I think if you ensure you input everything (and don’t forget something) correctly, there should be no problem. After all, TurboTax can only use what you input.

  • Jeff W.

    Even if he had used a person, the taxes would have been wrong and there would still be penalties. He could have easily forgot to give the tax professional the 1099 just as well.

  • sirwired

    Sure… they even have a name for it… an “Offer in Compromise”. They are routine and not even particularly difficult to get if you meet the requirements.

    If it does not appear you are actually trying to evade taxes, they don’t have a goal of gratuitously punishing you.

  • PsyGuy

    The LW is saying they don’t owe the tax though, that the issue is the wrong person named on one of the W-2’s or 1099’s or something.

  • PsyGuy

    Because Chris is a deity with superhuman god like resolution skills.

  • PsyGuy

    But Chris is a deity with superhuman god like resolution skills.

  • PsyGuy

    True, but H&R block allows you to upload your W-2’s and 1099’s from the IRS database. So if a software or programing error caused that process to error that I would think should fall under the guarantee.

  • PsyGuy

    H&R block allows you to upload your W-2’s and 1099’s from the IRS database. So if a software or programing error caused that process to error that I would think should fall under the guarantee.

  • PsyGuy

    I know right.

  • Not sure how that works, as some people file their return before the W-2’s and 1099’s are fully processed by the IRS. The W=2’s are not sent to the IRS by employers, but sent to Social Security. It takes time for that submission to get to the IRS.

  • Carol Molloy

    Aha. If I miss understood the situation, then I apologize. However, and I may still be confused about the fact pattern, the IRS will permit you to refile to correct a mistake. If the refiling does not increase taxes owed, in the cases I have seen, they are quite reasonable.

  • sirwired

    I think the LW is saying that he filed his wife’s W-2 as his own. When their income combined under one person, it was over the maximum amount of income that Social Security taxes (SS tax is done on an individual basis, not a per-return basis.) The IRS then would have issued a refund for over-paid Social Security taxes, instead of applying it to his wife’s Social Security.

    The 1099’s appear to have been skipped, as best I can tell. No excuse for that one. (They are only mentioned once in the story.)

  • Mike

    TurboTax isn’t infallible. I had a similar situation happen to me. I owned a rental property, and I followed the screens as I went along and it allowed me to double claim the property tax for the rental property. 2 years later the IRS sent me a letter saying “wait a minute…” At that point I contacted a tax expert and they helped me through the whole process. I then had to amend the following year’s taxes along with the state taxes. In all, it cost me over $3,000. Do I think Intuit was responsible? Not entirely. I think their accuracy verification needs a lot of work, however, it was knowledge of the tax rules (good luck with that) on my part along with me thinking I was doing the right thing that cost me the money. Lesson learned? I don’t do our taxes anymore. The $500 a year (Which is deductible, BTW.) is money well spent.

  • Mike

    You can amend your taxes, and pay the difference. The IRS will then bill you interest and penalties, if any apply. I was in this situation where I had to amend another year due to a mistake I made to a prior year. It was actually pretty painless, at least for the IRS anyway. The IRS just wants they money they’re owed, and will work with you if needed.

  • Mike

    The IRS won’t work with Chris on this. The law says they have to work with the taxpayer, or, in cases where you paid a preparer, that individual. Ultimately, it’s you who is responsible, not anyone else. You could always take a CPA or whoever prepared your taxes to court after the fact, but it won’t help you with the IRS.

  • Mike

    Ultimately, the OP needs to work with the IRS. They’re reasonable, and as mentioned, will go through everything. They don’t want money they’re not entitled to. They have a responsibility to insure the law is applied correctly and that taxes owed are received. That’s it.

  • Dutchess

    Even if it wasn’t a input error he would still be responsible for the tax owed, Intuit would only reimburse him for INTEREST and PENALTIES. I’d wager that’s a relatively small part of what he owed.

    What is the TurboTax 100% Accurate Calculation Guarantee?

    In plain English, if you pay an IRS or state penalty or interest because of a TurboTax calculation error, we’ll pay you the penalty and interest.

    https://ttlc.intuit.com/questions/2566201-what-is-the-turbotax-100-accurate-calculation-guarantee

  • AAGK

    If he prepared his taxes with a pen, instead of software, would he seek compensation from the pen manufacturer. The software calculates the info provided. He failed to disclose all of his income so he would have had the same issue had he used a CPA.

  • AAGK

    Welcome back, Blackadar.

  • AAGK

    Their crystal ball software add-on for an extra $200 :)

  • AAGK

    He accidentally or on purpose withheld the extra income.

  • AAGK

    The same problem would exist with a CPA. They only know what you tell them. If the IRS then learns about it after the fact, for example a bank files a 1099 indicating a profit on a sale of stock, the IRS will seek the capital gains tax.

  • PsyGuy

    I think the LW was saying the income was someone else’s?

  • PsyGuy

    That doesn’t sound like the IRS? Weren’t they the ones that actually got Cappone?

  • PsyGuy

    Well that’s not entirely true you can bring a CPA or an attorney with you as well.

  • PsyGuy

    Yeah I really don’t know either. This is why I have someone do my taxes for me.

  • PsyGuy

    Oh I could have misunderstood too, I could be defending a position that doesn’t actually exist, it’s taxes anything is possible.

  • PsyGuy

    Not sure either, all I know is there’s a way to upload your W2’s and 1099’s when you get to the window about entering income.

  • AAGK

    Bc the IRS requires us to report other people’s income now? Even so, Intuit would not be responsible for an IRS error.

  • PsyGuy

    Well there spouse, which is till someone else.

  • Mike

    Yes you’re right. But a consumer advocate? Not so much.

  • Mike

    It was. However, they’re not out to put everyone in jail. They were actually quite helpful when I had my issue. They wanted their money, of course, but they weren’t playing “gotchya!” There’s no way any one person can say he knows the tax law inside and out.

  • AAGK

    Nope. If married and filing jointly then it is the same thing.

  • PsyGuy

    Unless they are married filing separately.

  • PsyGuy

    How do you know if you’re one of the ones they are trying to put in jail or not? Sorry, bit of personal history, I had a close friend who talked with an at then reputable financial planner about direct investment in the asian market. So my friend set up a brokerage account and was doing very well, but didn’t realize that he had an undeclared balance with this account. Turned out his account was being used to move cash in and out of the US through his account (of which he really had no knowledge). Ended up getting 3 years in prison. The IRS was not during the process anything close to “helpful”.
    Aside from that, how does the IRS know they are right about the tax law inside and out?

  • PsyGuy

    A consumer advocate is worth WAY more than a table full of lawyers. When Chris advocates there are actually happy people at the end of some of the cases, when you go to court the only people ever happy at the end of the case are the lawyers.

  • AAGK

    Then he didn’t need to include her income and the IRS erred. Either way, not a Turbotax issue. It crunched the numbers submitted.

  • Tanya

    Did someone at least let the OP know about the first time penalty abatement process. He can at least get the penalties removed (not taxes or interest on the taxes) and reduce the amount owed by a bit. All it takes is a letter to the IRS and then 6-8 weeks of waiting for a response. So long as the taxpayer has been in compliance for the previous 3 years, the penalties should be removed. If the request is denied and there have been no other abatement procedures in the previous 3 years, just appeal the decision in writing and then it normally goes through. I would say 90% of the time, the first letter works.

    That being said, no CPA or program will/should EVER guarantee about input error. If you have your taxes done by a professional, the cover letter probably makes mention of the fact that the professional has utilized the information that you (the client) has provided and it is up to you (the client) to review the tax return for mistakes and omissions. The professional has no way of knowing about income if the client never provides the information.

  • Tanya

    We routinely get a POA on our larger clients and will run the transcripts from the IRS to be sure we are not missing a 1099 hanging out there, however, this is only true of returns filed after June/July as it takes the IRS that long to enter all the information from the 1099’s and W-2’s.

  • AAGK

    Those clients are in great hands with you. With my own taxes, I usually receive a bunch of letters from banks with the year end tax stuff in Dec, then an updated version in Jan and sometimes a 3rd even later. If the tax is owed, it is owed and the OP is characterizing this as a consumer issue. That is either a clever way to avoid paying or he just had no idea what’s going on.

  • Mel65

    Was this recently? Turbo Tax caught my duplication when I claimed mortgage interest twice, accidentally because it was our first time with a seller funded mortgage, that i entered on both the screens for mortgage interest and then again under a 1099.

  • Mike

    About 8 years ago.

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