The tax software mess continues (for tax year 2015 returns)

Last year, I was was surprised and disappointed when various tax software programs seemed to fail when it came to correctly reconciling the self-employed health insurance deduction with the premium tax credit.  TurboTax seemed to come closest to getting things right, and H&R Block never did figure it out.

I had been an H&R Block user for ages, but got a refund from them and shifted to TurboTax.   This year I stuck with TurboTax… though quite frankly  I am not a fan of the software.

But I did assume that with another year to sort out all the glitches, the software packages would all have it things figured out by the time 2016 rolled around.

However, it seems that my assumption was unwarranted.  Already the glitches are a subject of puzzlement and debate.

So I’m creating this new post as a place for comments concerning the ins and outs of the software.

H&R Block Product Refund Update

Still waiting…..

I requested a refund from H&R Block for the cost of their software program on 3/30/15, because of the program’s inability to handle the self-employed health care deduction for taxpayers who are buying off the exchange.   I had purchased and downloaded the software directly from H&R Block on 12/30/14.

I was initially told that my request needed to be handled by their “escalations” or 3rd tier refund department, and my request would be handled within 48-72 business hours. However, no refund — I called today to inquire and was told that that my request was still in the queue and the escalations/3rd tier refund had not yet responded; that no time frame could be promised; and that once the refund request was processed, it could take 4-6 weeks for the refund to be provided.  I also had to wait on hold for about 2 hours for my call to be answered.

Fortunately, my credit card company is much, much nicer.  I contacted them to register a dispute over the credit card charge. No hold time at all.  They promised gave me an immediate “temporary” credit to my account. They will give gave the merchant (H&R Block) three calendar days to respond to the dispute, and then issue issued a chargeback. They immediately credited my account with the full amount pending resolution of the dispute, and charged the amount back to H&R Block 5 days later.

So at this point, it looks like I’ve got my money back, whether or not H&R Block agrees.

I’ve also e-filed all my taxes with TurboTax.

_____

Update, May 2015:  H&R Block did also send me a paper refund check for the cost of the software, which arrived in late April. As I had already received the value of the refund when my credit card issued the charge back, I did not deposit the H&R Block check.   But basically, they did what they said they were going to do, but it took longer than I was willing to wait.

Another Tax Update: Harry Sit’s “bakeoff”

Blogger Harry Sit has reviewed the 3 most popular tax software packages, employing a simple test to gauge accuracy of calculations of self employed health insurance deduction and premium tax credit.  His review confirms what our contributors have collectively determined:

• TaxAct:  Works; closely replicates IRS example, with slight discrepancy due to rounding.
• TurboTax: Works; closely replicates IRS example, with slight discrepancy due to rounding. However, taxpayers who also need to prepare a Schedule C will need to purchase the highest price, “Home & Business Edition”.
• H&R Block: Total fail. Users are advised that the software package does not include necessary features to prepare tax returns for self employed taxpayers who have purchased insurance via an exchange.

Read the whole post at The Finance Buff

The TurboTax Test: It works.

(…And I’ll tell you how)

Well, today is April Fool’s Day — but this post is no joke.

I’m a long time H&R Block user– but H&R Block essentially bit the dust when it didn’t manage to include the ability to reconcile the self employed health insurance deductions with exchange premium credit eligibility:  all self-employed taxpayers who bought policies from Healthcare.gov or their state exchange during 2014 are out of luck.   We’re greeted with a message that the software can’t do our taxes this year.

So off I went to buy new software.  This isn’t a good year for TurboTax users either, because this it the year that TurboTax changed it’s program and pricing policies.  If you want to have the program prepare a Schedule C, you’ve got to buy the highest price “Home and Business” edition — listed at $104.99 on the TurboTax softeare for the online product;  $99.99 for the  downloadable software.

But with a little shopping around I saved $35 — Amazon Prime members can download the software for $64.99, at least for now. Other retailers, such as Costco, also offering similar discounts. 

H&R Block Fail Part 2:

This is the message that shows up in HR Block Software after the most recent (March 26) update.

This message shows up EVEN IF the taxpayer is NOT entitled to ANY tax credit. In my case, because of unanticipated non-earned income during 2014 (a capital gain from sale of assets) my income is too high to qualify for the tax credit, and I will have to pay the full clawback amount.

H&R Block: Total Fail

Users of H&R Block report receiving this message when attempting to prepare their return after the latest update:

“Since you’re claiming the ACA premium tax credit and the self-employed health insurance deduction, your return requires additional calculations that aren’t part of the program. To file an accurate return, we recommend you complete your return with an H&R Block Tax professional.

You must fix this problem before filing.”

At this point the best option for self-employed taxpayers who are or may be entitled to claim a premium tax credit for exchange-purchased insurance appears to be TurboTax, which appears to calculate amounts correctly.

TaxAct software seems to also be able to handle the correct calculations, so may be an acceptable alternative to H&R Block.

 

IRS Weighs In

The IRS Publication 954- Premium Tax Credit — is finally available.  Information about calculating the self employment health insurance deduction, including worksheets, can be found on pages 21-37.  This includes detailed instructions for complex situations, so it is worthwhile to read.   The worksheets can also be used to double check results from tax software.

I will be taking some time to review this document and plan to summarize important points in forthcoming posts.

Tax Software Update

Calculation of self-employed health insurance deduction & advance premium health credit:

TaxAct:   MAYBE(?). Calculates using IRS iterative calculation

TurboTax:  MAYBE (?). Calculates  using IRS iterative calculation

HRBlock:  FAIL.  After install of 2/12/15 update, software reports:

Since you’re claiming the ACA premium tax credit and the self-employed health insurance deduction, you’ll need to get our next update to complete our return.

You must fix this problem before filing.

Next expected update: March 12, 2015

(Based on individual, anecdotal reports. One user reports differing results from TaxAct vs. TurboTax)

A little bit of good news from IRS

Worried about paying a clawback?  If you received an Advance Premium Tax Credit to subsidize your health insurance in 2014, but then had an unexpectedly good year financially in 2014,  you may be required to pay all or part of the credit you received. However, IRS has announced that it will waive penalties for late payment for taxpayers who are otherwise current on their taxes and who file their returns on time — either April 15th or in October after filing for an automatic extension.   The waiver of penalties includes an extension of time to pay the clawback amount.   Interest will still be charged, so it’s advisable to pay by April 15, 2015 if possible; but this may be welcome news for taxpayers who did not anticipate the impact of the clawback amount.

Here’s what the IRS says:

Tax Software — Fail?

I had assumed, apparently too optimistically, that the major tax prep software programs would be able to easily handle the problem of reconciling the self-employed health insurance deduction (line 29 on form 1040) with the premium tax credit calculation (form 8962).  After all, as complex as the IRS instructions may be, the actual calculation is simple math.   IRS regulations have now given clear guidance, with two methods for calculation, and this should be a fairly easy task to integrate into the program software.

Unfortunately, this does not appear to be the case.  I personally use H&R Block tax prep software and buy the “Premium” version which is advertised as best for self-employed.  But when I experimented with the program, I found it didn’t seem to be making any reconciliation at all.  Instead, the program was erroneously calculating the tax credit based on the MAGI with whatever value had been previously entered as the total self-employment premium, without making any adjustments as required by IRS.