let me get this straight.... the IRS says it is easier to do your taxes by hand then to use a computer program. something seems wrong here! is the IRS lying? maybe the IRS doesnt want you to use a computer program because you will pay less taxes??? maybe it is easier for the IRS to audit you if you do your taxes by hand? i don't know. something seems fishy.
RS stirs uproar over tax software Says job is done easier with a pen
Jon Kamman The Arizona Republic Feb. 23, 2006 12:00 AM
Using a computer program to figure income taxes takes longer than doing it by hand, the IRS claims, infuriating the tax-preparation software industry.
The accounting profession also is protesting the agency's estimates of the costs of having a professional calculate various types of returns.
The outcries are in response to what the Internal Revenue Service introduced in its latest tax instruction booklets as a new, "more accurate" method of estimating the time and cost of filing.
The figures are based on a survey of 15,000 taxpayers and 400 tax professionals, IRS spokesman Raphael Turino said.
Since publishing the figures, the IRS has issued a statement online saying they are all but useless.
Calling the data "fatally flawed," a trade group representing the makers of such programs as TurboTax and TaxCut urged this month that the Internal Revenue Service Oversight Board investigate "this genuine mess."
"IRS research managers readily admit that this information does not compare apples to apples," Bernard McKay, chairman of the trade group and vice president of Intuit Inc., testified to the oversight board.
Intuit makes TurboTax, the nation's top-selling tax software.
"We have further been informed that the estimates . . . are actually extrapolations from research conducted five years ago, and the raw data from that original research has been destroyed," McKay said.
IRS spokesman Bill Brunson, asked if McKay's information was accurate, said the agency has a policy against responding to outside testimony. He would not discuss whether the survey data still exist.
At issue are tables on Page 79 of instructions for filing Form 1040.They assert that on average, individuals and business filers who prepare their own returns using computer programs could do them faster with pen and paper.
That's the conclusion in eight of nine categories representing varying complexities of tax returns.
On average, a non-business tax return takes 21.8 hours using a software program, or nearly six hours more than doing it by hand, according to the IRS.
An average business return is shown as taking 67.1 hours with software, or 22 hours longer than by hand.
Reactions have ranged from incredulity to distress.
"It's wrong," said Denise Sposato, spokeswoman for H&R Block, creators of an array of TaxCut software, which ranks second in market share.
"I don't know how they came up with those numbers," said Lance Dunn, president of the company that makes the free online TaxACT program. "It's counterintuitive."
"By any standard, this is invalid research and an unusable and meaningless statistical analysis," McKay testified as chairman of the Council for Electronic Revenue Communication Advancement.
The IRS, in an online explanation prompted by the complaints, said the estimates reflect that users of software generally have more complicated returns.
Other factors cited are the time spent downloading, installing and learning a program.
The agency also acknowledged that the times listed for software users, but not pen-and-paper filers, include exploring "alternative tax scenarios," or plugging in different figures to see the result.
In instruction booklets, the IRS said the tables can be used "to determine the average burden of taxpayers like you."
Online, it now says: "Because of the numerous variables, these nationwide averages should not be used by taxpayers or tax professionals as a guide for anticipating the cost or time involved with preparing an individual's tax return."
Brunson declined to answer questions about whether the figures are meaningful, saying only that Congress requires that they be published.
Cost estimates, presented for the first time, are generally far below prices found in the marketplace, the American Institute of Certified Public Accountants wrote the IRS in November.
"It would be a wild coincidence if anyone ever wound up being charged what the estimates show," especially in major metropolitan areas where maintaining an office is expensive, Tom Ochsenschlager, vice president of taxation for the CPA group, said Wednesday.
He also complained that the IRS made no distinction between the amounts a certified professional, as opposed to a neighborhood part-timer, might charge.
Figures could dissuade taxpayers from using software that allows them to file electronically, McKay and Ochsenschlager said, thwarting the federal government's effort to have 80 percent of returns e-filed by 2011. Charles Lacijan, staff director for the IRS Oversight Board, which monitors IRS performance but has no enforcement powers, said no formal investigation is being conducted.
"I view the issue primarily as one between the IRS and its private sector partners, but I am monitoring developments," Lacijan said.