TurboTax says mistakes by its tax preparation software affected more than 12,000 Oregon tax returns, incorrectly directing them to take the state’s standard tax deduction in cases when people could save money by itemizing their deduction.
Intuit, the Silicon Valley company that owns TurboTax, told state officials that it has a fix in place. Intuit said it will soon begin notifying clients about how to amend their returns and reduce their tax bill in emails to the state reviewed by The Oregonian/OregonLive.
In a separate statement Thursday, Intuit claimed that TurboTax’s blunder affected only “a small number of customers.” The company said it is “actively engaging with those filers impacted to ensure their returns are correct and that they receive the maximum refund they are owed.”
Intuit hasn’t said how much money Oregonians overpaid as a result of TurboTax’s error. Some tax filers told The Oregonian/OregonLive that the mistake directed them to pay several hundred dollars more than they actually owed.
If so, that means TurboTax could have cost Oregonians millions of dollars in tax overpayments altogether.
“Fixing this error will require identifying all affected Oregonians, notifying them, and ensuring they can be made whole,” U.S. Sen. Ron Wyden wrote in a letter to Intuit on Thursday.
Wyden, D-Oregon, asked the company to explain what steps it takes to test its software and what went wrong in this case. And he called on Intuit to issue refunds for the price of its software to Oregonians affected by the mistake, citing TurboTax advertising that promises to return money paid for the software to customers who get larger tax refunds from an alternative tax preparation method.
“Intuit has a history of deceptive advertising, but I expect it to make good on this guarantee,” Wyden wrote. He noted that the Federal Trade Commission found in January that TurboTax had engaged in deceptive advertising when it promised “free” tax services to some customers.
Intuit referenced its guarantee to return the purchase price of its software in its statement Thursday but did not explicitly say it will be refunding what TurboTax customers paid for the service. It did not immediately respond to a question about whether it will honor its guarantee as Wyden demanded.
Nearly all the people affected by the mistake were using TurboTax’s desktop software, Intuit told the Oregon Department of Revenue, instead of its online service. The company said it has identified electronic filers who were affected but is still sorting out who was affected among customers who used its software and then mailed in paper tax filings.
Intuit said it is preparing a notice for taxpayers “with guidance to amend, fix and re-file their return.”
Oregon officials notified Intuit of problems with TurboTax’s software in early April, ahead of the tax deadline, according to public records. Intuit initially said it couldn’t duplicate the issue Oregon officials found.
The company acknowledged the problem to the Department of Revenue this week after fresh inquiries from the state and The Oregonian/OregonLive.
Tax filers can reduce their tax bill by deducting charitable contributions, business expenses, mortgage interest payments, medical expenses and other items.
But itemizing expenses is only advantageous if the size of those deductions is greater than the standard deduction. Oregon’s standard deduction was $2,605 for single filers last year, or $5,210 for married people filing jointly. (Some classes of filers had different standard deductions.)
TurboTax directed some Oregonians to take the standard deduction even when the itemized deduction was larger.
In emails to Oregon officials over the past week, Intuit representatives didn’t explain how the TurboTax mistake happened or why the company didn’t catch it even after the state notified them of a potential issue.
But an Intuit representative apologized twice to the Department of Revenue “for the inconvenience this is causing.” It did not include an apology to customers in Thursday’s brief statement.
This article has been updated with Intuit’s brief comment.
-- Mike Rogoway covers Oregon technology and the state economy. Reach him at mrogoway@oregonian.com.
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