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Another fail for the TurboTax Defense

August 26, 2009

Taxpayer doesn't enter his taxable retirement plan distribution as he does his return using TurboTax. TurboTax doesn't catch the error. IRS catches the error when it runs its 1099 match. Taxpayer blames Turbotax.

The Tax Court didn't go along (citations omitted):

Petitioners have not met their burden of persuasion with respect to reasonable cause and good faith. Mr. Hopson admitted that he received both Forms 1099-R for the distributions and that he knew they constituted income. After using tax return preparation software for nearly 20 years, he simply filed the return that was generated by the software without reviewing it. The omission of the distributions resulted in the failure to report over 40 percent of petitioners' total income for the year. Granted this was a one-time event, but petitioners nevertheless had a duty to review their return to ensure that all income items were included. Petitioners were not permitted to bury their heads in the sand and ignore their obligation to ensure that their tax return accurately reflected their income for 2006. In the end, reliance on tax return preparation software does not excuse petitioners' failure to review their 2006 tax return.

The Moral: The "Garbage-in, Garbage-Out" Doctrine trumps the TurboTax Defense.

Update: Heh. "The Tax Court yesterday rejected a taxpayer's attempt to use the TurboTax defense successfully employed by Treasury Secretary Timothy Geithner."

Cite: Hopson, T.C. Summ. Op. 2009-130

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Hi Joe,

I know Geithner didn't get charged with breaking any laws, but did he also get out of penalties?

He avoided penalties, too.

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