Software programs may make doing your taxes easier, but they don’t offer legal protection. If you make a mistake while using one of the increasingly popular tax software packages to prepare your return, the Tax Court won’t let you off the hook for a penalty.
One taxpayer found that out the hard way when she tried to blame errors on the TurboTax software program that she had used to prepare her returns over the years. Unfortunately for her, the IRS audited her returns for two of the years and found a number of mistakes in how she handled rental properties she owned. Among them: She reported losses from sales of securities on Schedule C, which is used for business income and losses, instead of Schedule D, which is for capital gains and losses. And she claimed a loss on a property where her father lived rent free.
The IRS sent her a bill for unpaid taxes -- and assessed penalties on top of that. She argued before the Tax Court that use of a tax software program insulated her from any penalty. She pointed out that Treasury Secretary Timothy Geithner also used TurboTax and made some very well-publicized errors on his tax returns that almost derailed his nomination. (After first appearing to blame the program for his misreporting of his income, he later took full responsibility for the mistakes.)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Tax Court gave her argument short shrift, finding that the additional taxes she owed were caused by her own input errors, not by a flaw in the TurboTax program. It upheld the IRS’ imposition of penalties against her. Had Geithner made the same argument in the Tax Court, he would have lost, too.
-
Higher Summer Costs: Tariffs Fuel Inflation in JuneTariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Don’t Miss Alabama Tax-Free Weekend 2025Tax Holiday Ready to save? Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Higher Summer Costs: Tariffs Fuel Inflation in June
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Parents Prepare: Trump's Megabill Brings Three Crucial Tax ChangesTax Changes Are you a parent? The so-called ‘One Big Beautiful Bill’ (OBBB) impacts several key tax incentives that can affect your family this year and beyond.
-
Ask the Editor, July 17: Tax Questions on the New Tax LawAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new tax law.
-
What to Know About New Medicaid Cuts: Is Your Local Hospital Closing Soon?Tax Policy Trump’s ‘One Big Beautiful Bill’ is now law, and rural hospitals across the U.S. are on the chopping block.
-
Electric Car Owners Can’t Avoid Road Taxes in 2025New Taxes Hawaii launched its new EV road usage fee in July. Here’s why some states are implementing similar new electric vehicle taxes across the nation.
-
Ask the Editor, July 4: Tax Questions on Inherited IRAsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Elon Musk and Most Taxpayers Don't Like What's in Trump's 'Big Beautiful Bill'Tax Policy President Trump is betting big on his newest tax cuts, signed into law on July 4. But not everyone is on board.
