No. of Recommendations: 5
Mike wrote: Intuit (Turbo Tax) and others (HR Block). . .

Mike, the problems I am mostly seeing and hearing about is the data that is imported by Turbo Tax and HR Block. The programs appear to upload the data 100% accurately from the brokerages in my experience.

The problem is that the data from the brokerage contains errors. In some cases, the problem is not the brokerage house. It is a company for example that reports dividends. We see this a lot in REITs. The taxpayer receives $100 on March 15, 2012. The dividend can be characterized in many different ways:

Regular dividend, taxed at full margin rates
"Qaulified" dividend, taxed at lower rate
Capital gains that represent unrecaptured 1250 gains
Capital gains that represent 1250 gains
Return of capital

In these cases, REIT XYZ that paid out the $100 will change how much goes into each of these categories. I do NOT blame the brokerage houses for these changes.

What I do NOT understand is the taxpayer receives $100 on March 15, 2012 and the brokerage house reports it either at $200 or at ZERO i.e. it is not reported. In 2013 with automaton being what it is, this does not make sense to me.

The other case I do NOT understand is the taxpayer received $1,000 on July 1st, 2012 from a stock sale, bond sale or maturing bond. Yet, the brokerage house does NOT show any transaction. Somehow it got dropped.

In these cases, the programs will dutifully report the wrong numbers to the IRS. The taxpayer is given the choice of reporting the correct numbers which will show up as a discrepancy to the IRS or just accepting the numbers the brokerage reports as being the facts..

And none of this discusses the cost basis issue which I suspect will cause the largest number of discrepancies. . .

Luckily for the IRS, a lot of tax returns do NOT contain any investment income, just W2 and/or Social Security. These returns appear to be a lot more straightforward and are easier to perfectly match up.

Good luck to the last minute filers . . .

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.