TurboTax face-off: Treasury nominee vs. Intuit

Correction at 9 a.m. PST: Tim Geithner's nomination status has been corrected. His nomination has not come up for a full Senate vote yet.

This was originally posted at ZDNet's Between the Lines.

Treasury Secretary nominee Tim Geithner--the man who hopes to be entrusted with overseeing the Internal Revenue Service and a remaining $350 billion in bailout funds--apparently isn't so smooth when it comes to Intuit's TurboTax.

His mention of TurboTax as he tried to explain away back taxes during a confirmation hearing last week highlights two common problems in IT: users vs. software, and the "garbage in, garbage out" conundrum.

Last week, a flurry of news reports noted Geithner's comments about TurboTax. As background, he was grilled about failing to pay more than $34,000 in payroll taxes earlier this decade.

Geithner said he "mistakenly believed" he was meeting his tax obligations. When asked which tax preparation software he used, Geithner noted that the taxes were his responsibility, "but I used TurboTax to prepare my returns."

This incident--see The Wall Street Journal's live blog and Senate Finance Committee video (TurboTax mention comes at the 48-minute mark on the January 21 video)--highlights the never-ending user error vs. software tug-of-war in IT.

Was your application screwy or did you fail to input data? Were Geithner's tax problems the result of TurboTax's failure to flag potential issues--like payroll taxes--or Geithner's failure to cough up critical information.

Intuit was clear about where it stood. In a statement, Intuit said:

Each year, millions of Americans use TurboTax to accurately prepare and file their federal and state tax returns. The software helps taxpayers report their income and find the deductions and credits they're entitled to claim. TurboTax, and all software and in-person tax preparation services, base their calculations on the information users provide when completing their returns. TurboTax also has built-in error-checking tools that routinely catch common taxpayer mistakes. Federal law and our own privacy policy prohibit us from discussing specifics of any customer's return.

Advantage Intuit. No one watching Geithner's testimony is likely to buy the blame-the-software routine. Clearly, this fiasco is a "garbage in, garbage out" issue. Geithner didn't provide the necessary data.

The larger question is whether a guy who wrestles with TurboTax should realistically be expected to oversee the IRS and fork over $350 billion in bailout money. I'll leave that for you to decide since that answer goes well beyond the scope of my blog. I'd hate to add yet another IT problem--scope creep--to this post.

In the end, Geithner will probably be confirmed, but his standing has certainly been diminished.

[gopnick]

Good post! There is no way we should trust this guy with our economy.

[JaquesLenoir]

Do you think that Paulson was better? Remember the 2 pages TARP application!

[M C]

It will be sad if this is the argument we use to reject someone for an important position.

Especially because Intuit itself has had tax-related issues: in past years, Intuit charged state sales tax on mail-order and Internet sales despite no physical presence in most states, and has yet to prove that they have passed on that sales tax to the individual states.

I trust Intuit about as far as I can throw them, and my main gripe about the incoming Treasury Secretary is that he wasn't smart enough to use TaxCut instead.

[i8246i]

If you belive that someone that relies on a 3rd party to do their taxes is smart enough to manage our treasury....


Here's your sign

[FASTFRED4007]

Although I fully agree we should be looking for someone else as head of the US Treasury, do not under estimate Turbotax. I have Oil and Gas clients who use Turbotax and Oil and gas tax returns are extemely difficult to prepare.

I do not think in the Senate hearing there was an implication that Turbotax got it wrong.

Big hand for Turbotax

[rmva]

"Geithner was ultimately confirmed, but his standing has been diminished."

Error creep. He hasn't been confirmed yet. The Senate vote is scheduled for Monday evening.

[almz25x]

Perhaps this nation is in the "situation" it finds itself because far too many of it's citizens believe this to be a serious statetment, "The larger question is whether a guy who wrestles with TurboTax should realistically be expected to oversee the IRS and fork over $350 billion in bailout money. I'll leave that for you to decide since that answer goes well beyond the scope of my blog. I'd hate to add yet another IT problem--scope creep--to this post." Next we'll be testing the metal of the joints chief of staff by his play level in World of Warcraft. ...

[SactoGuy018]

Question: why are we wasting right now around US$300 BILLION per year (and going up every year!) trying to comply with a 67,000-plus page Federal tax code so complex even the IRS can't figure it out?!

If President Obama wants real change, it's high time to seriously take a look at our Federal income tax system and consider MASSIVE changes to cut the compliance cost or eliminate it altogether. There are a number of very interesting proposals out there do do this, and they should all be considered.

[FellowConspirator]

Hear, hear! I see no reason that the Federal Tax Code couldn't be reduced to 25 pages (OK, maybe with 200 pages of notes clarifying those 25). It should be possible to simply the entire system to the point that: it isn't necessary for individuals to file a tax return (as in most countries), and that 90% of the IRS staff becomes redundant.

It sounds impossible, but it really isn't. Too many people pay taxes to make it practical to make the rules complex, or to require paperwork.

[jptarqu]

I second the proposal of MASSIVE change to the IRS code.

[rteichman]

When I heard on the news that he missed paying the other half of the tax, even though the IMF warned their employees about I was thinking how could he miss that. After hearing that he used Turbo Tax I can now understand. Don't get me wrong, I think Turbo Tax is a great product and I have used it for years, but it asks questions and makes assumptions based on your answers. I would not be surprised to hear that he entered the information correctly but Turbo Tax did not add in the other half of the tax. Why, because I know it does not ask the question, "did your employer pay what it's half to the IRS?" Turbo-Tax assumes the employer paid it because that is what the law requires. The fact that the IMF works "outside the law" for every other business is not taken into account by the software.

[ikramerica--2008]

That's an interesting hypothesis. I guess only his hairdresser knows for sure. I highly doubt he was trying to evade taxes, just that he messed up.

But on a grander scheme, he's not fit to be Treasury Secretary. He's in the same filthy bed as Paulson. It's hardly change when you replace one of these crooks with another?

[consag]

Geithner is not very bright or he purposely tried to avoid ta