Exclusive Interview With TurboTax Whistle Blower

Last week, I did a blog post about Mr. Charles Freret who went on a one-man crusade to expose a flaw in the popular do-it-yourself tax program: Intuit’s TurboTax.  You can read that article & post here.   After Mr. Freret read the aforementioned post, he contacted R&G Brenner and agreed to sit down for an exclusive interview.  Mr. Freret’s story of persistence to discover the truth is incredible.  What he uncovered along his journey is TurboTax is miscalculating tax returns on a large scale.  And upon further investigation, the TurboTax flaw was present not only in the current tax year program, but tax years 2008 & 2007 as well.  Coverups, Lies & Government disinterest all will eventually lead to more money out of TurboTax users pockets.  Here is his story:

R&G Brenner (RGB): How long have you been preparing your own taxes?

Charles Freret (CF):…over 40 years

RGB: So you’re pretty well versed in preparing your own taxes, and you have been doing them by hand!?

CF: Yes

RGB: Was 2010 the first year you used TurboTax?

CF: No, I used it once before in 2004

RGB: But this tax year, you discovered a problem with the calculation of your taxes using TurboTax?

CF: That’s correct, and the only reason I used it this year…was because I had a free [e-file] submission

RGB: In order to get your refund a little faster?

CF: Yes

RGB: Ok…and you discovered that there was a problem with TurboTax increasing your refund.

CF: Yes, by [giving] a deduction twice.

RGB: Double counting [the medical insurance premium] deduction?

CF: Yes…in the wage income section of [TurboTax] it asks you how much in box 5 of the 1099 are for medical insurance premiums…then a screen pops up and asks how much of box 5 was for medical insurance and to put down the same number that it was showing in box 5…apparently the program takes that figure from the wages income section and transfers it to the deduction section automatically, that’s how you get the double counting amount but they don’t tell you that when you’re filling it out in the wage income section in the program.

RGB:  So when you realized that the taxes were being miscalculated using TurboTax can you take me through the timeline of who you contacted and what were their reactions?

CF: Alright. I called Intuit [the makers of TurboTax] and was routed to Rochester New York and spoke to a nice women and explained to her that I was getting a double [deduction]…she took control of my computer by remote and watched [me do my return, and when finished] she said ‘yes it is counting the deduction twice’!. Her response was that the only way to get around it was NOT to include the amount from box 5 in the deduction section, [opposite of what TurboTax instructs]… She thought what TurboTax would do to fix it was to put some kind of notation or message telling people not to take it the deduction the second time.  Well I thought about it and I said ‘well this could be a big problem’. I then called some of the newspapers here in the area; Washington Post, Washington Times, Wall Street Journal and the New York Times…really didn’t get a whole lot of responses. I also called the IRS and I [c]ouldn’t get anywhere there, so I called Treasury and finally got someone in the technology department of the Office of the Inspector General and he listened to the story…Treasury called back on Wednesday March 31St and we spoke for a long time and I explained to him the problem.  He mentioned he had helped fill out his father income tax using TurboTax and he wondered if his father’s [refund had also been incorrectly increased]…I tried the New York Times again…and I presented my information to [them] on Friday morning April 2nd…[The NY Times] called the Treasury and they said [they could not recreate the problem I was having]…so it sounded to me like [they] were getting stonewalled.  He came back to me we did [the return] together (him from New York, me here form Virginia) looking at each screen at the same time, talking about it over the phone and he saw where it happened. So he went back [to the Treasury] and said ‘look I have done it too and the mistake is there’! And finally they admitted [the error] only pertains to retired federal employees

RGB: Are you a Federal employee?

CF: I was, I am now a retired Federal employee…they admitted to [the reporter] on Tuesday April 6Th that yes it affects Federal retirees who use a 1099R. So the reporter got back to me [with what they told him], so I said ‘well I will go look at the other 1099Rs in the program. TurboTax lists four types of 1099Rs: the first one is 401k’s, the next one is Federal retiree, the third one is survival benefits and the fourth one is for railroad workers…so I went back and did the other 3… and I submitted the same information for each and found the same flaw in the program!  It would spit out double the deduction.

RGB: So this problem wasn’t just limited to Federal Retired Employees?

CF: No, it was not. It affected 3 out of the 4 1099Rs that they listed in [TurboTax]…

RGB: My associate had mentioned that you looked for this problem in older versions of TurboTax as well?

CF: The reporter and I both had the same question on our minds: ‘Was this year’s tax program the first time the flaw was there’?. I was able to access each of the programs 2008, 2007,2006 and 2004…. 2004 came up with no problem…So I thought ‘let me start now at 2008, the tax year before this…I did it submitting the same information and the flaw was there!  Then I did 2007 and the flaw was there too! 2006 did not present any problem, so I assumed that the flaw started in the 2007… I called [The Treasury] back Thursday April 8th and told them that [the TurboTax program flaw] also affects 2008 and 2007. I then called the Federation of Tax Administrators to tell them…because it reduces your taxable income so you either get a larger refund or you get a smaller tax bill to pay. In other words if that double counting of  your medical insurance premiums raises your deductions beyond the standard deductions then the program says its more beneficial for you to take the itemized deduction…if you itemized on Federal you have to itemized on State. And so that’s how it affects the State…if it increases your deductions on your Federal then when you go to your State the program is going to give you a higher amount to subtract from your State.

RGB: First of all the amount of red tape and research you had to go through is astounding! I guess the biggest question I have for you is why do you think that the IRS isn’t making a bigger deal out of this especially since they are in the losing end by giving inflated refunds?  Especially in a economic environment like this…there are Federal & State budget crises and this [Turbo Tax program flaw] is giving out free government money!

CF: Well that was probably the biggest! Once I [discovered the flaw] I could have just filed it through TurboTax and I will get money that I didn’t plan on getting because it bumped my Federal up $600 and my State up by $400. So it took me from owing the State $327 to the State owing me $113.  So first and foremost I couldn’t do that, that’s just not right and second I thought the economic situation that we live in–if this is wide spread–look how much money the State and Federal are loosing because of the TurboTax program!  So that’s why I thought I should probably tell someone. I just couldn’t not do anything. I didn’t think that was right.

RGB: And especially since you have discovered that [the flaw] is not only limited to Federal retired employees and that this problem affect 2007 & 2008 as well…this is going to be a very big problem for [TurboTax users] when the Federal and State governments come asking for their money back! And I can tell you from experience, if your taxable income is incorrectly lowered they will 1) want the taxes that are due to them and 2) charge penalties & interest on owed taxes not paid on time.

CF: TurboTax basically has announced that they don’t think it will impact a large percentage of the tax filing population. I don’t know. On Saturday when I was interviewed by Fox & Friends about this, TurboTax only issued a statement pertaining to 2009 because 2007 & 2008 had not come to light in the newspaper article because that was published before I found this out…and I didn’t have an opportunity to say this on the television interview. Plus, I don’t think TurboTax has really looked into how many people had been affected….I see no information put out there saying ‘hey its not just this years tax program its actually the last three years 2007, 2008 & 2009. TurboTax is trying to sweep it under the rug the was my initial feeling.

RGB: Well that is what I am thinking. The fact that this problem goes back three years is more of a problem than they are leading on…plus the Federal & State Governments must know that they are on the losing end of this!  If I found out a contractor of mine was inadvertently giving away my money, I would want to put a stop to it immediately.

CF: I thought that there may be disinterest from both the Federal Government and Turbo Tax–I felt that Turbo Tax may be stonewalling because they are on the hook for any penalties or fees that may result from this program flaw…,so there’s a loss that they are going to suffer…yes the [taxpayer] is are responsible for [their tax liability] but if there are late fees and penalties added to tax payer burden, TurboTax is on the hook for that, I can see them trying to sweep this under the rug

RGB: Well of course you can understand from TurboTax’s point of view, but not from the Government’s point of view.  Is the Federal Government trying to steer taxpayers away from paid preparers and toward do-it-yourself software?  That could be a reason why this story isn’t big news—that is, not big news yet.  If they are trying to convince or steer tax payers to prepare their own taxes, this would be a huge pockmark on that endeavor as TurboTax is sold as a solid and very “clean” program…a program that services some 40 million taxpayers a year!

CF: Well, I think TurboTax is actually running the numbers for the Federal government as to how many people are affected. When I spoke to the Treasury–as did the reporter who explained it to me–it sounded like the Treasury department was accepting what TurboTax was telling them…which was less then one half of one percent of they tax payers are affected.

RGB: Right, now that’s using their conclusion that it only affected Federal employees which you yourself had already debunked.

CF: Yes, right and I see nothing else about the two preceding years of 2008 and 2007 affected by it.

RGB: This is a huge story.  I can’t believe this isn’t on all the news networks!

CF: Here is the other thing, Fox & Friends called me back …to verify all the info and when I would be on the show. [Fox] told me that TurboTax had sent a letter explaining their position and I asked her how Turbo Tax knew I was going to be on the program because I hadn’t told anybody?  In fact when the program aired and [Fox asked] ‘why did I do this’ they cut to a written statement on the screen on what TurboTax had submitted pertaining to the flaw in the program. It basically said that we only think it affected less then one half of one percent and we’ve done everything to fix the program, etc.  I know one story I read…said that TurboTax had contacted the Treasury and the State departments [about the program flaw].  THAT’S NOT TRUE, because I contacted the State and Treasury before Intuit/TurboTax ever did a thing, and they were trying to cover their backs after the story came out in the New York Times…

RGB: This is very fishy…

CF: Yes and I don’t think everything is accounted for and I don’t know what will ever happen, but I did everything I could.

RGB: I think you’re a real patriot.

CF: well I think any decent person would have done the same thing, particularly in these economic times that we are living in if both State & Federal are losing money such that their budgets are so tight that they cut programs, and services that taxpayers lose…and I just think that’s wrong! And possibly hundreds of thousand of retirees that are affected or find out that their refunds have been inflated and now have to return the money and/or be subject to penalties or interest won’t like me very much.

RGB: I am not so sure that many people would do what you did….but I am glad you did.  Thank you.

If you are a TurboTax user for tax years 2009, 2008 or 2007 and would like to know if you are subject to extra penalties or interest as a result of their program flaws, please contact us today. We will review your return(s) for FREE to make they were filed correctly.  We also encourage you to contact your Federal, State & Local governments to inquire if you will be required to return a portion of your refund(s) and if you are subject to any penalties or interest.  Contact TurboTax and force them to admit their mistakes, and ask how they intend to compensate affected tax payers.

  • Tom

    Thank you CF- are you going to cover the tab for those that made, or didn’t catch this error in good faith?

  • R&G Brenner

    I’m sorry, Tom. I don’t quite understand your question.

  • Tom Hudson

    I directed my question to the wrong person, though given your patriotic stance it may apply as well.

    I am on SSDI, my wife is retired; we are affected by Mr. Freret’s discovery to ~$2k. This is before penalties & interest, which Turbo Tax states they will cover. The mistake was honest, without intent to defraud IRS.

    Turbo Tax (TT), by their admission offered a defective program that did not force a review or stops like it does in other parts of their programs to prevent this type of mistake.

    IRS accepted TT’s product for use giving proof that the product was good and free from defects; their acceptance of the TT program would imply that there is a guarantee of it working perfectly. It did not!

    We did not get a COLA this year, nor next year; most likely a COLA is 4-5 years away. Mr. Freret should be getting a portion of what IRS subsequently ‘recovers’ under various programs/laws.

    Will he financially help those affected by TT’s error?

    Will he start an action to get those affected by TT’s error to have the amount forgiven? And those amounts made non-taxable?

    Not to question anyone’s intentions, but when discussions took place, why wasn’t the forgiving all amounts due a subject and part of the outcome?

    Can I get a copy of Mr. Freret’s email? I would like to thank him.

  • manager

    Thank you for your comments and though your questions should be directed toward Intuit directly I will try my best to give you some answers.

    Though the IRS allows returns to be submitted to them through Turbo Tax; this does not mean that they have checked the accuracy of the software. Returns are reviewed as selected for audit and the calculations are checked at that point; so the IRS does not guarantee that any software is correct, they only allow the returns to pass through the systems to them.

    It can take 2-3 years for the IRS to issue a letter regarding a discrepancy in the preparation of a return so it is very possible to get a letter down the line if the discrepancy is recent. As the taxpayer it is your responsibility to correct any errors you find on your return regardless of the IRS’s action, however in some cases the IRS does not catch the error at all and if the time passes they will miss out on retrieving the funds.

    It is highly unlikely that the IRS will retroactively deem something as non-taxable that has already been labeled as taxable. So unfortunately though the idea of tax forgiveness would be nice the taxpayer is going to be responsible to pay the liability. According to the law the taxpayer is the only one responsible to pay the tax liability so Intuit is only responsible to pay the interest and penalties which they have already stated they will pay.

    Since you are affected by this issue, you should contact intuit directly and ask their customer service how they will be handling this issue. We would be very curious to know their reply.

  • tom

    BTDT, 1 1/2 days on phone + 1/2 day of emails. The phone saga involved the installation of original’ software to allow back engineering of what was done, installation and checking that it worked along with updates.

    Initially, my wife was advised by TT (phone) to initiate contact with IRS; the web site said “…don’t do anything [proactive] unless you get a letter from the IRS… [then deal with it]” Outstanding advice! My wife decided to get pro-active, thus started a day of fun(?) in a do it yourself root canal kind of way. The TT rep was great to deal with, generally sharing the same sentiments for resolution previously expressed; as time wore one (I’m sure his supervisor was giving him Hades for time spent with one client) the TT rep. sided even more with us.

    After finally getting off the phone, my wife started the re-construction process. There was one minor problem, in order to recreate the blunders ALL questions have to be answered exactly the same! With the reams of back up paper printed, the info of record was incomplete due to lack of ‘temporary worksheets’, etc.! There was yet another call, this time answered by someone that that knew what permissions had to be given to TT to pull up the complete records, and all worksheets done. in 10-12 business days we will know for sure if we can figure out what the damages will be. Still don’t have the money, and the question of penalties, fines etc. being due at the time of filing the amended return is going for want of a definite answer.

    Re: IRS not responsible for software accuracy. There are sections of CFR & USC that set standards to be upheld for compatibility and accuracy od products before an agency can accept a product for use; if this isn’t so what were IRS’ issues with previous vendors and a reluctance to allow use of their products?

    Re: taxpayer responsibility, as there was [generally] no attempts to defraud IRS, my original thesis remains- Intuit & IRS should work out a deal to COMPLETELY FORGIVE the debt & penalties which has happened before. Perhaps Mr. Freret being as noble and patriotic as his intentions expressed in the interview wouldn’t mind using some of his IRS bounty money to help the affected folks.

    BTW, I’d still would like to get a copy of Mr. Freret’s email, or home address- I would still like to thank him. A true Patriot doesn’t hide under the bed when things get a bit rough, he/she joins the other Patriots to take the fight forward to the enemy. Perhaps Whitman was right when he said via Pogo “we have met the enemy and he is us!” [the taxpayers in this case].

  • MHebert

    I just received a letter from the IRS stating that my 2008 return was incorrect. It was prepared via TurboTax online version.

    It seems that TurboTax calculated my Earned Income Credit to be double what it should have been, and also claimed the Additional Child Credit which apparently I was not eligible for. So now I’m in the hole for 2400 due to no error on my part. Since my household income comes from my paltry unemployment check and my disabled daughter’s SSI, I really can’t afford to pay this back. I will have to contact Intuit on Monday and will keep you updated.

    Oddly enough, I did make an error on my earned income reporting in that I claimed a lower amount. This error would not have effected my tax liability, but would have increased the amount of EIC claimed by TurboTax (and thus given me an even bigger bill than I have now).

    Hopefully, I will be able to get this resolved. (Original comment edited by Moderator)

  • MHebert

    Looking over what went wrong, it appears that TurboTax decided to add to my earned income in the amount of $10987 (a string of decending numbers 10-9-8-7) for the purposes of calculating earned-income-based credits.

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  • He mentioned he had helped fill out his
    father income tax using TurboTax and he wondered if his father’s [refund
    had also been incorrectly increased]…I tried the New York Times again.