March 11, 2007
Intuit Response #1- Not so good
Last week I blogged about a possible TurboTax 2005/2006 bug:
Possible ESPP-related bug in TurboTax 2006 (and 2005) — decheung.com
Short version: If you have a stock transaction that results in $0.00 capital gains/losses, TurboTax may not document this on your Schedule D. However, the IRS will match your Schedule D against your 1099-B and this may raise warning flags.
Since then I’ve found that at least one other coworker has run into this problem. I emailed Intuit support and I got a very prompt answer. Unfortunately, it wasn’t very useful. Here’s what went down.
I said:
TurboTax 2005 and 2006 fails to document Employee Stock Purchase Plan transaction on the Schedule D if there are no Capital Gains. The IRS requires this because they match the Schedule D entries to the 1099-B’s.
As a result, coworkers and I have been notified by the IRS that we did not report these transactions (true) and that we owe a lot of money (not true).
I’ve blogged about it here:
http://www.decheung.com/2007/03/possible-espp-related-bug-in-turbotax-2006-and-2005.html
And they replied:
Hi Dennis! My name is Christine and it is my pleasure to assist you today.
I understand that you are having a problem regarding Employee Stock Purchase Plan transaction. I do apologize for any inconvenience this might have caused you but I will be more willing to help you resolve this concern.
From the information that I have gathered, you are using TurboTax Desktop Deluxe. I would like to provide you information that might help resolve this concern.
Entering ESPP Sales
The gain or loss on the sale of your ESPP shares may be treated as ordinary income instead of capital gain or loss if:
- You bought the stock shares at a discount from the market price, or
- You owned the stock for one year or less, or
- You began buying the stock less than two years before you sold it.
If your shares are treated as ordinary income, look on your Form W-2. It should include an amount called “ESPP Disqualifying Disposition” or “ESPP Qualifying Disposition” or something similar.
Add this amount from your W-2 to the cost of the shares to figure the total cost basis to enter for the sale.
If you don’t see an ESPP-related entry on your Form W-2, contact your ESPP administrator, who will give you the information you need.
Thank you for allowing me to assist you today. Within the next 24 hours, you will receive a brief question survey about your support experience. Please respond with feedback so that I may continue to provide great assistance to everyone. Thank You.
For further inquiries, please do not hesitate to email us back or you may contact us at 1-888-777-3303 and be able to talk to one of our friendly representatives from 8:00 AM to 5:00 PM Monday through Sundays for further assistance. Thank you for choosing TurboTax! Have a Great Day!
Respectfully,
Christine Mae G
Intuit Tax Products Customer Service & Support
“Revolutionizing how people manage their financial lives”
Pretty good reply - for a totally different (and likely frequently asked) question. Do you see anything about Schedule D in that reply? I don’t.
But here’s the part that really kills me:
For further inquiries, please do not hesitate to email us back
That’s nice. Except that at the very top of the e-mail, it says this:
**Please do not reply to this message: This e-mail message was sent from a notification-only address that cannot accept incoming e-mail.
So should I reply or not?
I opted to reply using the website’s web form. Let’s see what happens next.
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34 Comments to “Intuit Response #1- Not so good”
March 12th, 2007 at 9:58 pm
Dennis… There are no known issues with the reporting of ESPP transactions in TurboTax. Transactions entered on Schedule D, even if there is no gain/loss, still get reported to the IRS.
I’m not sure what you may be doing to suggest that this is not the case, but I will say that reporting ESPP transactions can be very confusing if you are not using TurboTax Premier. Premier walks you through the entire process to ensure you do it correctly. Although TurboTax Basic and Deluxe support the calculations for ESPP transactions, you have to enter the information manually. This generally accounts for many of the challenges of getting the information in correctly. This is certainly one reason it pays to get the TurboTax product that’s right for your specific situation.
Bob Meighan
VP, TurboTax
March 13th, 2007 at 2:38 am
Hi Bob,
Your reply indicates that ESPP is complicated and is best left to TurboTax Premier Investments 2006. Perhaps this is my misinterpretation, but it seems to me that you are implying that if I were using TurboTax Premier Investments 2006, this would be calculated correctly.
Well, I -am- using TurboTax Premier Investments 2006. And still the Schedule D is being filed incorrectly.
Maybe this is a big misunderstanding - so to help clear things up, I’ve created 3 screenshots and 1 video.
1. Video: This video shows me using TurboTax Premier 2006 to enter 2 ESPP transactions. The first results in $0.00 capital gains/losses. The second results in a capital gain. Observe that only the second one gets documented on the Schedule D - despite the IRS rules that both should be documented on Schedule D.
http://decheung.com/archives/TurboTax2006/Video1.wmv
2. ESPP1: This screenshot shows the ESPP worksheet generated by TurboTax Premier Investments 2006. Note that it shows $0.00 capital gains/losses. Again, I do not dispute this.
http://decheung.com/archives/TurboTax2006/ESPP1.png
3. ESPP2: This screenshot shows the ESPP worksheet generated by TurboTax Premier Investments 2006. Note that it shows $402.90 capital gains/losses. Again, I do not dispute this.
http://decheung.com/archives/TurboTax2006/ESPP2.png
4. Schedule D: This screenshot shows the resulting Schedule D after entering ESPP1 and ESPP2. Note that it only reflects the transaction from ESPP2, not ESPP1. This is not consistent with the requirements of the IRS and will trigger a review (in the form of CP2000.)
If you call the IRS and ask, as I have, if all stock transactions should be listed in Schedule D, they will say yes.
http://www.decheung.com/archives/TurboTax2006/ScheduleD.png
I’ve now spent almost 12 hours investigating this. Have you been able to personally reproduce this problem? Do you agree that TurboTax Premier Investments 2006’s behavior of leaving $0.00 capital gain/loss ESPP transactions off of the Schedule D is correct - even though the IRS says it is not?
March 13th, 2007 at 9:20 am
I’ve run into exactly the same bug this weekend myself. I didn’t take screenshots like Dennis did, but I’m using TurboTax Premier 2006 for the Mac, and have 4 ESPP transactions. 3 show up on Schedule D; the 4th does not because it has a capital gain/loss of $0.00.
Very frustrating. I ended up having to manually edit the ’smart’ section at the top of the Schedule D worksheet to force a new line to appear on Sched D showing those numbers. At least then I could e-file a valid return.
March 14th, 2007 at 9:29 am
You are correct in that if you have zero capital gain/loss from the ESPP transaction, it is not showing on Schedule D. Although the calculations and tax liability are correctly computed, the fact that transaction is not reported on Schedule D may cause a reconciliation error at the IRS (difference between sales reported by broker and sales reported on Sch D). We believe this error crept in during one of our updates this season and we are tracking it down.
We will be providing an update as soon as possible to correct the reporting issue. I don’t have a specific date, but I know the team is working on it now.
Additionally, I’m skeptical that you would have no gain or loss on the sale of ESPP stock. In all the company plans that I’ve seen, employees normally have a nominal fee on the sale (something like a $5 fee). If you really don’t have any fees either on the sale or purchase, here is how I would suggest you workaround the issue. Simply enter sales proceeds $0.01 less than the actual amount(for example, enter $9,999.99 instead of $10,000). Or simply enter $0.01 in the box for purchase commissions/costs. This one cent difference will trigger the reporting and not have any impact on your tax liability.
I hope this information helps and I appreciate your bringing this issue to our attention.
Bob Meighan
VP, TurboTax
March 14th, 2007 at 12:01 pm
Hi Bob,
Thanks for investigating this. I urge you to ship an update to this sooner rather than later - but being familiar with software development, I know that can be challenging.
That said, I do have two comments on your reply:
>>We believe this error crept in during one of our updates this season and we are tracking it down.
I was able to reproduce this exact same problem in TurboTax 2005. I don’t know what version it was (because it is sitting at home) but I’m pretty sure it TurboTax Premier. The reason I know this is because it is -that- version of TurboTax that caused the IRS to investigate me, and has cost me so much of my time. So let me tell you now that this is not a new flaw.
>>Additionally, I’m skeptical that you would have no gain or loss on the sale of ESPP stock. In all the company plans that I’ve seen, employees normally have a nominal fee on the sale (something like a $5 fee).
I believe you are referring to the commission and regulatory fees the broker collects on selling the shares. My understanding is that due to the nature of this transaction, those fees come out of the ordinary income portion of the resulting transaction, and not the capital gains/losses section. Hence, the capital gains/losses stays at $0.00.
Either way, the current behavior in TurboTax 2005 Premier and TurboTax 2006 Premier Investment is simply wrong. I think we both agree on that.
March 18th, 2007 at 5:12 pm
Hi Dennis, thanks for posting this information. I’ve encountered problems with TurboTax’s ESPP interface when I received a mysterious 1099-MISC form which I now understand to be a representation of the ESPP discount income from an employer I left two years ago. For all the cumbersome hand-holding they do in the web interface, there’s little help when I actually need it. I’m also still bitter about the inane truncation error that affected only certain users (which is why they chose not to proactively tell anyone?!), which resulted in all numeric fields having their decimals truncated (very bad for share prices!).
I know how to compute the cost basis myself and identify the unreported W2 income, so I’m trying to go the route of 1099-B and skip ESPP altogether. Is there any reason why this wouldn’t work?
Thanks,
Robert
March 22nd, 2007 at 10:23 pm
Hi Dennis,
Last year I used TurboTax Premier 2005. I was unaware of this bug till today. Today I got a letter from IRS for audit saying that, I owe IRS $xxxxx for security sells reported by others (and not reported by me). After going thru last year’s tax forms finally I found that this is due to Turbo Tax Premier 2005 bug in ESPP handling. Even though final totals schedule-D are correct, I don’t think that I deserve to go thru IRS audit pain for Turbo Tax bug.
Turbo Tax claims that it has “Accuracy Guarantee” :
http://support.turbotax.intuit.com/cgi-bin/turbotax.cfg/php/enduser/ag_faq_page.php?ip_seltab=3&p_sid=dcZwuexi#one
I am going to file my claim with Intuit. I will keep you posted on my claim progress with Intuit.
Thanks,
Vincent
March 22nd, 2007 at 10:42 pm
Please do let me know!
March 27th, 2007 at 9:34 pm
I used Turbo Tax premier 2005 and just got a letter from the IRS saying that I owe $X,XXXX.XX + due to the same ESPP turbo tax bug. I even imported my ESPP information from Smith Barney thinking turbo tax was the real deal.
Bob Meighan, can you refer me to someone who can help me figure out how much I really owe the IRS manually since I cannot trust turbo tax?
Thanks,
Rodrigo
April 4th, 2007 at 7:53 pm
I got my letter from the IRS yesterday saying that I owe them a lot of money and I also used TurboTax 2005 last year.
I’ve been pouring over all my documentation tonight and I was pulling my hair out trying to figure out how I missed entering 4 out of 5 of my ESPP sales. I just knew I had entered them so I did a quick google search on “turbo tax espp bug” and found your blog.
Thanks dtc, you’ve saved me a lot of frustration. At least I know what happened now.
It seems the IRS must be aware of this by now so hopefully that will make things go nice and smooth for me, but what a hassle! I think Intuit should definitely reimburse the cost of filing for last year to those who were affected. Thankfully I didn’t sell any ESPP in 2006 or I might get audited again.
Now I can tell my wife “see honey, I didn’t make a mistake” after she’s been telling me for two days I should’ve gone to the accountant.
Thanks,
jb
April 10th, 2007 at 1:58 am
I also used Turbo Tax Premier to file 2005 & 2006 returns and experienced software glitches. The program incorrectly transferred my 2005 K-1 data to the wrong boxes, causing me confusion and distrust for the program. In addition, once I entered State information in Box 12 (Section 179 deductions) on the K-1 section, the program would not allow me to delete it regardless of what I did. I called support and they were able to replicate it. They suggested that I delete the entire K-1 and reenter the entire form. The proposed solution did not work. Somehow the program remembered the data even when I created a new K-1.
The glitches sure undermine my trust in the program. After all, when it comes to taxes, who wants to take the time to explain the results of program errors to the IRS, even if they don’t affect your tax liability?
By the way, Bob Meighan, sounds very condescending to say he’s skeptical of your data without even appologizing for the glitch, the time you wasted with the IRS, the way TT sends support emails that by design cannot receive a custmer’s reply, and the amazing amount of time you spent documenting the problem to get them to admit the glitch.
Bob Meighan
April 10th, 2007 at 2:10 am
Sorry, I accidentally ended my note with Bob Meighan’s name. I had pasted it to get the spelling correct in my reply. I am not Bob Meighan, but, on his behalf, I would like to offer everyone who experienced software glitches in Turbo Tax an apology. Especially to those of you who spent the additional expense to purchase the appropiate version of the software for their situation.
April 10th, 2007 at 8:12 am
Thanks Folks for this website- I, like Cheung and others, had a similar frustrating experience with the IRS Audit regarding this ESPP sales and Schedule D for 2005.
Sadly, all we get are these typical mechanical responses from TurboTax. We found one bug, what is the guarantee they don’t have more?
Maybe we can switch to something more reliable- a CPA? Indeed I don’t know if I can trust this TurboTax ‘Premier’ anymore.
Good Luck all.
Vijay Aitha
April 10th, 2007 at 10:53 am
I’m probably going to use a CPA next year - but then again my tax situation will be changing this year since I’m getting married.
April 10th, 2007 at 12:53 pm
i found your post here as nonesense.. your problem here Dennis is caused by your foolishness.. considering you’re a Program Manager at Microsoft, why don’t you hire a CPA to do your Taxes correctly..
you work for Microsoft… you must know the “shortcomings” of computer softwares.. Basically Turbotax rely on Microsoft’s framework to work properly..
I also heard that Microsoft will launch a Tax Preparation software in the next 2 years.. is that why you’re giving bad comments onTurbotax?
Peace!!
April 10th, 2007 at 1:11 pm
Hm, I’m not sure where to begin with that comment.
David: What do you use to file your taxes?
April 12th, 2007 at 9:30 pm
HI All
I just noticed another bug with the turbo tax web edition espp calculation worksheet. When calculating the cost basis (i), for some strange reason, turbo tax added an extra $.001 to the amount shown on (c). Has anyone else noticed this?
April 13th, 2007 at 5:07 pm
Turbotax Home and Business Problem
1. So many bugs.
2. Always finds errors, then those errors no more errors. And then errors again.
3. Questions are hard to impossible to understand what they mean.
4. Phone support 90% in India and has no idea what they are talking about. Takes longgggg time to reach.
5. Phone support gave me a wrong number to Home & Office Support.
6. Clicking on “Live Community” gives the following screen and text (ERROR):
7. TurboTax Live Community BETA
Sorry, an error has occurred.
Live Community is only available from TurboTax Online. If you are having trouble accessing Live Community, close all browser windows
and re-login into TurboTax Online.
If you continue to get this error message, please check our technical support Website for more information.
MY COMMENT: that is what I was using… TurboTax ONLINE… Relogin etc. does NOT help. Allowing pop-ups and allowing their URL does not help either! Change browser does not help either.
8. ALL Q&A give the same error screen.
9. “Sticky checkbox and sticky radio box” problem. The boxes will remain checked/selected even if you uncheck them.
April 14th, 2007 at 10:54 pm
Have “successfully imported” 4600 stock transactions into TT Premier and TT won’t give me a Schedule D-1. I see all the transactions on a Schedule worksheet but the completed tax return has no D or D-1. Help!
April 17th, 2007 at 11:27 pm
I WAS a Turbo Tax fan…….. until THIS YEAR! I give up! No matter what I do, or what the cost basis is for a stock sale, TT online adds the gross proceeds on stock sales to my total taxable income. I tried the “Let TT assist me” and I tried “Do it myself” and entered the info line by line. NO USE! In the case of one stock, my loss was several thousand dollars, TT shows the sale as a Capital Gain. WTF? In the real world I sold off my dogs last year to take a big loss.. in TT world my big loss is really taxable income. I am sure glad I caught it… I have been screwing around with TT this year thinking it was me that was making the errors…. well, many many many hours of my life wasted because of asinine bugs in TT! NEVER EVER AGAIN, NEVER WILL TT OR INTUIT GET ONE MORE CENT FROM ME!! Turbo Tax is bug infested crap! To Hell with Intuit and their out-sourced India call centers!
April 18th, 2007 at 12:16 am
[...] I filed my taxes over the weekend. Fortunately, I didn’t have as many problems with TurboTax as the folks in this thread did. [...]
April 18th, 2007 at 12:10 pm
Well, looks like there are bugs on both sides of the pond. I ran into a few with H&R Block’s product as well.
http://blog.plaxoed.com/2007/04/02/known-bug-hrblockcoms-tango-cannot-actually-e-file/
May 27th, 2007 at 8:56 pm
[...] It was even less fun when I found out that it was due to a bug in TurboTax 2005 - and that the same bug was in TurboTax 2006. [...]
July 16th, 2007 at 12:25 am
Today I got a notice from IRS. I prepared it all using Turbo Tax. I don’t have much understand of tax, looked up PDF copy of my return and realized there is $xxxx.xx getting added to Total Tax With-held. I couldn’t trace how it’s getting populated. Schedule-D sure has less number of entries then what I prepared in Excel sheet based on Etrade numbers.
Now I am not sure what information to furnish. I have been using TT since 1999 and never learned to do tax without it. There is a $257.00 shown as interest, IRC Section 6601, From 04/17/2006 to 08/08/2007. It doesn’t look so good for a simple tax filer, all I have is Salary + ESPP + Bank + few additional trades.
I am thinking of getting some help from some CPA and then next stop is some lawyer. My TT, 05 copy got wiped out during last disk crash. CD’s got a scratch and won’t install.
No more relying on software in this matter.
JT
July 16th, 2007 at 7:47 pm
Tax withheld does not match IRS files VS entries on my 2005 Form 1040?
Ok, I used TurboTax for my 2005 taxes. Now, I am getting a notice from the IRS where they are asking for some money back. When I entered my W-2 info, I did it automatically entering Employer ID that came on my W-2 and it pulled it directly (and correctly from somewhere) into my e-1040. I did my stuff and e-filed it successfully.
Now, if I go and check back on TT 2005, I still see the same data, but by some reason the printed form and the summary one are actually displaying the discrepancy the IRS noticed. I’ve checked and re-checked my TT return and it is correct, but displays withheld incorrectly and sending it like that to the IRS and the printed forms. I also have to mention that I had a loss on ESPP and I am thinking it has to do with that…
I will call Intuit and see what happens…
July 17th, 2007 at 8:21 am
CGSOLANO,
Your case is similar to mine. Although IRS says the discrepancy is related to W2, it is actually not.
I figured the delta amount is coming from Tax Payment Worksheet, line number 17. There is an entry “Form 1099-B” with the amount in Federal column, which is the same amount as shown by IRS.
So far, I am not able to track, what’s the source of this 1099-B data on row 17. I don’t recall getting a 1099-B from any one.
Does it make sense ?
JT
July 17th, 2007 at 4:29 pm
Same thing here- letter from IRS saying I owe money for overreporting tax withheld. As it turns out TurboTax had added tax withheld from ESPP stock sales to line 64. TurboTax offered no warning that it was changing the automatically imported amounts from my W2.
July 17th, 2007 at 6:45 pm
Ok, I called Intuit and spent a significant amount of time tracking down the issue.
It turns out the problem indeed is with the ESPP entry. Smith Barney had taxed me on the sale of my stock, so I checked the corresponding box on TT. So far so good. When you click Continue, it asks you how much you were taxed on the transaction, so you happily enter the amount there and click on Continue.
It turns out that I should have left that entry blank since I had checked the box, on the previous window, that the transaction had been already taxed by my broker. Unfortunately, there should have been a trigger not allowing me to enter anything on this field if I checked Taxed on the previous window. Am I making sense here? If TT had prevented me from entering an amount on the screen due to clicking that it had been taxed, this would have never happened. It is not evident nor clear as of what you have to do, and I still consider this a bug.
Needless to say, Intuit is not responsible. Called the IRS and told them the situation. They want their money back, which is rightfully theirs.
I hope this helps others. BTW, I have to send an ammendment to my 2006 return since I did this same thing this year. They will want their money back some time next year.
July 17th, 2007 at 6:56 pm
PotVsKtl: Exactly! This is what I consider a bug. Should have let you know there was a discrepancy from what your W-2 says and what you end up on your line 64 on your 1040.
Frustrated TT User: I don’t know about this one, man. The 1099-B is also related to your ESPP, so if you sold stock this might be the issue.
July 30th, 2007 at 12:50 pm
I am glad I came across this site as I am yet another user, now to be former user of Turbo Tax. The IRS sent me a nice letter and I am not in the process of working through it all.
I just wish Turbo Tax would pick up the bill on my interest charges that I am now required to pay. I will now get a CPA here on out as that money will go to better use.
February 21st, 2008 at 3:04 pm
I’m freaking out, I just got a letter from the IRS saying my 2006 tax return doesn’t match the 1040 form. I don’t know what to do, look through all my documentation, or just go to a cpa for help? I used turbo tax as well in ‘06. I want to scream at my husband when he gets home from work for using turbo tax! Help!
March 25th, 2008 at 5:20 pm
I have had the similar issue with ESPP handling in this junk TurboTax and I ended up paying higher taxes past several years. I just realized it this year. I am considering suing TurboTax for that. Because, they are not ready to amend all my previous returns and take care of this problem.
I think these assholes are pathetic. Stop outsourcing such important software designs/coding to India/other cheap labor countries. You end up getting this Fucking bad quality software and support.
July 2nd, 2008 at 8:53 pm
To CGSOLANO, thank you so much for yor 7/17/07 comment. I got the same problem with Restricted Stock sales of my employer’s stock. Similar situation where tax worksheet showed an amount of tax paid from a 1099-B which I did not get because that amount was already include in my employer’s W2. “Give to Caesar’s what is Caesar’s” (Matthew 22:17-21)
From CGSOLANO: “Smith Barney had taxed me on the sale of my stock, so I checked the corresponding box on TT. So far so good. When you click Continue, it asks you how much you were taxed on the transaction, so you happily enter the amount there and click on Continue. It turns out that I should have left that entry blank since I had checked the box, on the previous window, that the transaction had been already taxed by my broker. “
July 16th, 2008 at 5:09 pm
I and several of my friends and co-workers got the letter from IRS due to the schedule D f-up last year. One guy spent a lot on lawyers and accountants, another guy fixed it with a 5 minute phone call. I sent a revised sched D and they were happy.
This year, I just got the letter stating my 1040 and W2 don’t match. I guess I’m 2 for 2. Go turbotax! Anyway, what’s the method to fix this discrepancy, is there a form that we can send in showing the math (W2 + ESPP witholding = 1040) to make it go away?
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