Sunday, April 16, 2006

Tax Issues
I worked through my taxes yesterday using TurboTax (Deluxe for Mac). But I hit a problem along the way. Below is my Customer Service inquiry at TT's website (submitted via a web-form).
After completing my federal return without trouble, I completed my state (NC) return.

I lived in NC from 1.05 through 6.05, and in TX from 7.05 through 12.05. Less than half of my gross income was made while I lived in NC.

Going through the NC return, the initial calculation on my taxes due was $[BigNumber]. I figured that this was because TT thought all my income accrued in NC. Sure enough, when it asked for the time frames for my income, and I entered the appropriate times for each W-2, my tax liability changed from $[BigNumber] to -$[SmallNumber]. (of course, this made me happy!)

At the time to efile, TT ran its error check and returned an error in my NC return.

The error: Line 7 on form D-422 was blank. To fix the error, TT asked me to enter a value.

Opening up "forms," it seemed to me that Line 7 of D-422 referenced lines 14 & 15 on D-400. So I made the calculations requested by Line7 (D-422) of Lines14&15 (D-400), and entered the difference in Line7 (D-422).

After completing this fix of the error, TT re-ran the error check function and declared an error free NC return. There was no indication that anything else had changed in my NC return, nor was there TT's normal, "you ought to recalculate your tax now" warning.

I clicked through the next steps to efile and waited for TT to transmit my Federal & NC returns.

As they were transmitted, the "Federal Tax Due" & "NC Tax Due" boxes refreshed. The Federal Tax Due stayed the same. (As it turns out, the Federal Government owes me money.) But when the NC Tax Due flashed up, it had reverted to a tax liability of $[BigNumber]. This was the same number that TT calculated before I'd indiated that less than half of my income was made in NC.

As this was revealed to me while the return was being submitted, there wasn't anything for me to do but cringe.

Once the returns were away, I re-printed my tax returns (I'd printed them before the error was found) and looking through the NC return, I see that on line48 of D-400, the "Income while a resident of NC" is absolutely wrong, and doesn't take into account that we only lived there half a year.

I looked through your FAQ and couldn't find instructions on what to do when one has efiled an incorrect state (NC) return. Is this an amended return situation?

Also, since I went through your step-by-step NC return process and couldn't fix this mis-calculation, I need some help to know what to do here. Despite my best efforts, is this a user error? Or is this a known issue that you're working on a patch for, and should I wait for such a thing? Or do I need to calculate my NC return by hand?

This is my 7th year using TT to file my taxes. I have never had any problems with TT and up to this point have been very pleased with your product. I almost did my taxes by hand, though, this year because needing to file NC income tax while only living there for 6 months seemed like a more complicated algorithm with more potential for TT failure. But then I figured that if you guys can figure out the Federal tax code, you can probably figure out anything, so I gave it a shot again this year.

I look forward to your suggestion for a resolution of this issue, and eagerly await your response.

If you'd like to follow my progress in resolving this issue, you may track it at my blog:
The website says I should hear back from them in 24 hours. I suspect that the first pingback will be a "We got your inquiry" automatic response. I thought I'd follow this interaction online since many Stokes Kith&Kin use TT & would be interested.

And while we're on the subject of taxes, what is up with the AMT (Alternate Minimum Tax)? When TT said that since my return was larger than the AMT, I wouldn't have to pay the AMT. I didn't quite know what to think of this, since the "M" stood for "minimum". If the AMT was smaller, shouldn't I be paying that, instead?

Then I saw the Journal's Saturday Editorial on the AMT. Their comment is that it should be called the Mandatory Maximum Tax, as it's not an option about whether you pay it, and the question isn't about you paying something less, it's about you paying whatever is higher. Wha? The older I get, and the more folks depend upon the income that I can generate (Kellsey, Aidan, for now), the more angry I get about income tax, and the less excited I am about my government giving money to folks who for whatever reason have not worked to earn said money. I know, some folks really do need it. I also know that there's neither an easy nor straightforward way to solve the problem. But it still really bugs me.

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