TurboTax Doesn't See Anything Unusual About Your $1,635,335 In Moving Expenses

Reader Elijah is glad he gave his taxes a manual check before sending them off. Despite accidentally inflating his cross-country moving expenses from $1,635 to $1,635,335, TurboTax’s audit check said Elijah’s return was “green” — meaning that he was at low risk for an audit. Now, Elijah’s wondering: If $2,000 error on his tax return wouldn’t put him at risk of an audit, what would?

Elijah writes:

During the Tax year 2007 I got married, and also moved to a new state. This added a few extra levels to my tax returns, so I decided to buy a copy of TurboTax to speed the process.

I entered all of the data for myself and my wife, and on the last step the software ran through a process to see if I was in danger of an audit. After checking all my stuff it gave me a “Green” rating, meaning that I was at very low risk of an audit. It also told me that my wife and I would get approx $4,000 as a return. I was pretty stoked.

Before I eFiled I printed off the return to check it over manually and boy, was I glad I did. When you get to the “Moving Expenses” page within TurboTax you have 3 boxes to enter individual expenses. We had a freight company, which cost $1,635 and hotel stays which were $335. What I hade done without noticing was miss the TAB between boxes, so my tax return showed a moving expense of $1,635,335. I can not, for the life of me, figure out why the software wouldn’t have some sort of upper limit for deductions that would catch something like this, or why it seemed to think a 7 figure deduction wouldn’t get me audited. After correcting the error my return was calculated to be about $2000.

Between that and all the last minute online filing fees I think I will take my tax preparations to a reputable accountant next year, rather then trusting lackluster software.

Whatever you choose to do, remember, tax prep fees are tax deductible.

(Photo: Getty)

Comments

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  1. Wormfather says:

    Actually, it’s not that bad. There’s a cap on deductable moving expences and even with hitting that cap you were still at a safe level.

  2. When did anyone ever say, “Submit software-prepared tax returns without double-checking them first”? Or any tax returns, for that matter.

  3. sir_pantsalot says:

    You are spending way too much time worrying about your taxes. Don’t sweet the small stuff man.

    -Willie Nelson

  4. wring says:

    don’t blame teh machine for your human error.

  5. primo.avanti says:

    no blame the op yet? you should always double check your tax returns, especially if youre entering it into an automated software…either way, it said you were safe and while its a bit suspicious, im glad you caught it…im sure somewhere along the way it may have been caught, like at the IRS, otherwise it said you were clear…

  6. rekoil says:

    You can always file an amended return to correct the error.

    [www.irs.gov]

  7. pegr says:

    Chances are, the IRS wouldn’t have caught it either, as you obviously topped the max deduction.

  8. Scuba Steve says:

    That number should have been caught. Human error or not, its one of the reasons there is software, instead of just randomly throwing numbers on a form and mailing it in.

    That being said, I don’t feel comfortable with TT unless I was only dealing with a simple tax return with most of the info available on my W2.

  9. hellinmyeyes says:

    Should be an easy fix. Like Wormfather said, there’s a cap on it, so it can’t be a huge difference. 1040X it up and get it fixed before the IRS fixes it for you…

  10. JDAC says:

    Smart move on double checking. My taxes are generally simple enough for 1040EZ, but even then I double and triple check the numbers, adding about 2 hours to the process.

    Obsessive? Yeah, but so far so good.

  11. DeleteThisAccount says:

    how is that only a 2k mistake? Because his return is reduced 2k…. I think its more like a 7 figure error.

  12. macinjosh says:

    Good job, Elijah. I’d like to invite you over to my house for Passover.

    @wring: Scuba Steve is right… this is what software is for. Otherwise, you could just use a calculator.

    And you should use teh spellcheck.

  13. backbroken says:

    At least this tip is timely. Or not.

  14. katylostherart says:

    well maybe they just adjusted for the rising gas costs.

  15. katylostherart says:

    @macinjosh: if a calculator was all it took to do taxes we wouldn’t need tax prep anything. i remember trying to do mine but i had a 1040 to fill out taxed as employed and not taxed yet as self employed income. when i looked up where things were supposed to go in which fields it would refer me to another page in the book, which would refer me back to the page i’d just gotten referred from. endless vicious cycle of incoherent references.

  16. Tax software really does not save you money. Trust me. Unless you have a very simple return and just like the convenience, an accountant will save you more than the cost of the software.

    Computer software can only be programmed with so much knowledge on your specific tax situation and also does not always know which questions to ask you to get the answers it needs…

  17. chrisjames says:

    I can not, for the life of me, figure out why the software doesn’t think for me.

  18. Televiper says:

    Come on now. Let’s not get into the habit of thinking that automated software is perfect. You should absolutely be checking it for errors on your own part. Though I do agree that an expense number that exceeds your income should be flagged.

  19. halversj says:

    How is it that 4 of the first 18 commenters either criticize the OP for not double checking or tell how to fix his incorrect return by filing amended return? That’s almost 1 of 4 that didn’t read that he caught the error by double checking BEFORE the return was filed. C’mon people, skimming the details and just picking out what you want to see got a lot of homeowners in trouble this year.

  20. bmeighan says:

    Elijah… Based on your scenario, TurboTax would have flagged your return as having a Net Operating Loss. This is one thing that should have clued you in on the input error. Second, the final review would have shown your bottom line as zero. Just another indication that something was wrong.

    As for your audit risk, the fact that your moving expenses were exceptional is just one item used in determining your risk. About 2 dozen other tests are used in determining your audit risk. So even though the amount you tried to claim was outrageous, it simply triggered only one of our audit flags. So it’s not too unusual that you may have still fell in the green range. It would not have been at the low end of the scale, but would have been closer to the yellow (caution) range.

    You should always review your return before submitting it regardless of whether you use software or go to a professional.

    I hope this information helps and I’m glad you caught your mistake.

    Bob Meighan
    VP, TurboTax

  21. SinisterMatt says:

    Good eye, Elijah! And Good job on checking the return before submitting that. Interesting that the software didn’t catch that.

    Cheers!

  22. C’mon, Bob, are you saying TurboTax shouldn’t have flagged his deduction of $1,635,335?

    I give you credit for posting a reply, but minus points for not thanking the OP and saying “We are always interested in hearing ways TurboTax can continue to improve and assist millions of users each year accurately and safely complete their tax returns.”

    See, I even wrote it in ready-to-use corporate speak.

  23. ElijahDProphet says:

    @bmeighan: Good on you for replying, I appreciate it. I think if you are looking to improve the software for next year an option to put it in Nanny Mode (or Elijah mode, if you like :-P) so that if any single deduction is over a reasonable amount (5 digits maybe?) it gives you a pop up prompt.

    To the other posters, yeah, I know it was my error, but I thought it was worth noting for others out there.

  24. pretzelgreg says:

    @twophrasebark:

    I dunno, Bobs reply seems to me to read that the OP gave selective info in his post. Bob indicates that the Net Operating Loss itself produces a “flag” ; also that the audit check shows a color coded “risk level” bar and the OP’s result would not have been an absolute low risk indication. I’ve used TT for 9 years now and have had pleasant ( if you can regard tax prep as pleasant ) experiences all around.

  25. ElijahDProphet says:

    @pretzelgreg: The NOL page did pop up, but do to various things in 2007 (I got married to a full time grad student, and was unemployed for a long period of time due to the move) I didn’t think much of it, since, as was pointed out, there is a cap on claimable moving expenses so my refund amount seemed normal.

    As far as the color coding goes, it was in the green, I assume because only one oddball amount was found when checking over the paperwork. An itemized list at this point might be a handy addition. “Your audit chances are Low, but here is something we found that seems a little odd”

  26. ElijahDProphet says:

    @ElijahDProphet: bah, DUE to various…etc

  27. pretzelgreg says:

    @ElijahDProphet: true that–I had to file a 1040x this year cause the wife got a $800 1099 form ONE DAY after I had e-filed ( in mid Feb ) don’t know about others but even simple mistakes make me nervous when the IRS is concerned. Probably should stop taking tax advice from wesleysnipes.com ;-)

  28. darksunfox says:

    HR Block’s Taxcut online version had a bug in it in late Jan/early Feb where it wouldn’t adjust for student loan payments… if I hadn’t checked it manually, I would have been out that cash. The CSR told me they knew about it and to “try again in a week” – yet they were still letting people use the software!

  29. quail says:

    Turbo Tax is Intuit software isn’t it? The same makers of Quicken and Quickbooks? One of my great dislikes of their software is that there is no data validation possible with it. Yes, you should always review a legal document before sending it off. But if this thing was built with some data validation it would have raised a red flag and asked if that huge number was entered correctly before proceeding. Good data entry software works at removing human error, which this did not.

  30. scooby2 says:

    I’ve learned to never trust Taxcut or Turbo Tax completely. I will use whichever is cheaper but always print out the final copy and double check everything by hand.

    Oddly I got a letter in the mail today stating my stimulus payment should be direct deposited by end of business on Friday. I guess that is what i get for waiting until April 15th to give them their money.

  31. civicmon says:

    The IRS is also known to allow the person who did their taxes on turbo tax to correct their returns if such an error comes up. They may have to “owe” taxes though, such as this fella.

    The IRS requires tax preparers to sign the bottom of the tax forms since if they’re incorrect, that’s the first place they’d start asking questions.

  32. Ritchel says:

    @scooby2: Oddly I got a letter in the mail today stating my stimulus payment should be direct deposited by end of business on Friday. I guess that is what i get for waiting until April 15th to give them their money.

    From the IRS’ web site about the stimulus payments:
    [www.irs.gov]

    Economic stimulus payments will be issued according to the last two-digits of the main filer’s Social Security number. For joint filers, the payments will go out based on the person listed first on the return. Payments will be made by either direct deposit or paper check, consistent with how people filed their 2007 tax return.

    So, for example, if you filed via snail-mail/paper check in 2007, and the last two digits of your SSN are 88 through 99, you’ll be in the last group of people to get their stimulus checks, which will be mailed out July 11.

    That might help all of the last-minute filers feel a bit better.

  33. coren says:

    Hey, I know a way to beat late online filing fees

    File early!