As Benjamin Franklin so
famously said, “in this world, nothing can be certain but death and taxes.” If I were to
describe doing taxes in two adjectives it would be stressful and annoying. Who’s with me???!! With tax season behind us,
it is time to start thinking about whether you filed your taxes correctly with
the appropriate accounting and deductions.
Actually, that is more like the last thing people want to think
about. Whether you use a professional,
do them yourself, or use one of the many online sites designed to make the
process relatively painless, most people do their taxes, get their returns, and
forget about it until next year.
Whether human or
machine, mistakes are made in the preparation of taxes and the IRS does not
take these lightly. Tax audits can
happen to anyone from big companies or everyday taxpayers. When the IRS thinks that you have not paid
your fair share of taxes, they may perform an "Income Tax
audit" of your tax returns, past and present. They usually come to
this conclusion when they think either you: haven't reported all your income,
or made deductions you shouldn't have. Although
often unnoticed, on the occasion that there is an audit, a mistake (or many)
can have consequences. In addition to
collecting money (with corresponding penalties of course), the government can
also place individuals in jail for tax evasion.
Recently at trial before
the tax court, one
taxpayer, or more appropriately one tax underpayer,
repeatedly argued that she always filled out their tax returns using TurboTax
and that she consistently confused capital gains and losses with ordinary
income and expenses. Although the Court concludes the errors in petitioners’
tax preparation were made in good faith, she did established that she behaved
in a manner consistent with that of a prudent person. Specifically a “prudent person” would have
double checked with another program, seen a professional, or otherwise sought
outside advise when encountering an unknown term. The verdict:
you cannot blindly rely on Turbo Tax to escape the penalties for your errors.
Ironically, this turbo
tax excuse was named after our current Secretary of Treasury Tim Geithner. Known as the Geithner defense, Geithner
argued that mistakes in his taxes were not his fault at all but rather were
problems with the tax preparation software. Geithner is not the only famous
name to have tax problems. Celebrities such
as Nicolas Cage, Willie Nelson, Marc Anthony, and Annie Leibovitz have all had
very expensive and very publicized problems with the tax man.
I, for one use Turbo Tax
to prepare my taxes and it is easy to get very mechanical in the process and
skip over important areas. I am not a
math person and find the forms, deductions, and all the numbers to be really
intimidating and confusing. Although the
software is easy to use, these cases show how it is also easy to abuse. I think that people need to be held more
accountable than the software they use and to blame all deficiencies in the
taxes on a tax program like TurboTax does not and should not fly with a tax
court.
By: Violet Petran
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