Why you shouldn’t trust tax prep software

February 24th, 2014 → 6:59 pm @ Carol

If you’re in business, you should get a professional to help you prepare your tax return and not rely on your tax software.

Here’s a perfect example of how tax software doesn’t replace a knowledgeable CPA.

 

Ohio has a new 50% tax deduction for small business owners. A small business owner can subtract 50% of their business profits from their Ohio taxable income.

Being a CPA, I knew about this new deduction, so I was a little surprised when the deduction didn’t show up when I prepared my client’s Ohio tax return.

It turns out that the form to calculate the deduction is not coded into my tax preparation software. The data does not get copied from the federal tax return automatically into the Ohio tax return. The information must be re-entered manually for the deduction to be calculated.

The Ohio Department of Taxation explains this problem on the CPAPracticeAdvisor.com blog  https://www.cpapracticeadvisor.com/news/11313530/ohio-small-businesses-get-new-income-tax-deduction

One thing to note, said Ohio Department of Taxation spokesman Gary Gudmundson, is that the form used to claim the deduction cannot be filed electronically.

“If you file electronically using Ohio’s I-File system or commercial tax filing software, when you get to our line 41 where you enter the amount of deduction, you get bounced out to that form — the IT SBD (Income Tax Small Business Deduction).

“The next step is to fill out that form, take the bottom line number back to the IT 1040 and enter it on line 41. Complete rest of IT 1040 and file.”

Gudmundson also said “electronic filers don’t have to submit the IT SBD but we recommend they keep it with their records. If someone files by paper, we do require the form to be included with their tax packet.”

 

So I manually entered her business income data and my client went from owing the state of Ohio $243 to a refund of $557!

Good thing my client uses a CPA (who knows the law) and doesn’t rely on tax software.

Carol Topp, CPA

Tags: CPA, tax, tax deductions