42 million Americans know better

Treasury nominee Timothy Geithner is now blaming Turbo Tax for his failure to pay the self-employment tax he owed. The excuse may work with Senators, but users of that, and other tax preparation programs, know better.

Jim Geraghty at NRO Online has a series of comments from users of Turbo Tax and other income tax software programs that challenge Treasury Secretary nominee Tim Geithner's recollection that Turbo Tax did not prompt him about the need to pay self employment tax. Geraghty concludes

About 42 million taxpayers file their taxes digitally with TurboTax software maker Intuit Inc., the clear market leader." About 42 million Americans are going to hear Geithner's answer and say, "that doesn't match up with my experience."

I have used several tax preparation software packages over the years, both those meant for tax professionals and those like Turbo Tax and Tax Cut meant for self prepared returns. Every program I have used automatically calculates the self employment tax for a self employed person, producing a Schedule SE and then carrying that amount to the proper line of Form 1040. If the user tried to override the software to show zero self employment tax, each software package would show an error diagnostic.

If the user treated the income as employee wages paid on a Form W-2 and no employment taxes were entered as having been withheld, again there would be a diagnostic. In fact, programs such as Turbo Tax contain both prompts for data entry and far more severely worded diagnostic messages about potential errors and omissions than the software tax professionals use.

In addition, programs geared towards self prepared returns tend have a final error checking step built in as part of the pathway towards produce a return that is ready to file that simply are not found in software for professional tax return preparers. This error checking step requires users to review and either correct or pass on all potential errors and omissions before it will print or electronically transmit the return.

In other words, a recollection that Turbo Tax did not prompt him about the need to pay SE tax may be an even lamer excuse than the earlier explanation that an accountant had told Geithner there was no need to pay the employment taxes.