The Vermont Department of Taxes is pleased to announce that taxpayers whose 2015 returns were impacted by certain commercial vendor software issues (related to itemized deductions) will not be required to amend or pay any additional tax. The department stopped processing any such amendments that it received after June 29, and any payments received related to such amendments prior to that date will be refunded. A good faith contribution by two of the tax preparation software companies, Intuit and H&R Block, has allowed the department to take this extraordinary action.
As previously announced, the Vermont Department of Taxes learned in April that there were coding errors in several tax preparation software products, which have since been corrected. Because of these errors, not all taxpayers who itemized deductions were correctly routed by the software to submit the IN-155 form, which calculated new statutory limitations for certain deductions. As a result, those taxpayers underpaid their 2015 taxes, due April 15, 2016.
Since that announcement, the department has worked closely with Intuit, H&R Block and three other software vendors to assist affected taxpayers to amend their returns (by filing a corrected Form IN-155) and pay the additional amount due. However, the timing of this with the department’s major IT project made those amendments impractical for both the state and impacted taxpayers. The department will launch its new, state-of-the-art VTax system for personal income tax in December.
In recognition of this extenuating circumstance, Intuit and H&R Block have stepped forward to help the department solve this problem and are making good faith contributions to Vermont’s General Fund. Intuit is contributing $2.375 million, and H & R Block is contributing $44,000. The department has also requested contributions from the remaining software vendors whose products had these errors.
Commissioner Mary Peterson stated, “We are very pleased that we could resolve this unfortunate situation with no further inconvenience to the impacted taxpayers. The errors were unusual in that they involved thousands of taxpayers. Although the average underpayment was relatively small, about $130, altogether we estimated that as much as $2.75 million of revenue could be at stake, in addition to the cost of dealing with the issue at the same time as our transition to the new VTax system. With this resolution, the department is pleased to continue to be right on schedule with its major strategic IT improvement project. We are very happy that as of today Intuit and H&R Block stepped forward to help us rectify the problem and make a significant contribution to the state to address the matter. We are in conversations with the other vendors and are hopeful we will reach similar agreements.”
“Our customers look to Intuit products to help them file complete and accurate returns, making it easy for them to fulfill their compliance responsibility,” said Intuit Vice President Whitney MacDougall. “Our promise to do right by our customers means that we are always focused on continually improving our products, and we stand by our accuracy and satisfaction guarantees for our customers. We regret that errors in our product placed a burden on taxpayers and on the Vermont Department of Taxes. Since this also happened during the state’s strategic system modernization project, we understand that this was a unique situation which was particularly difficult to manage. So we have agreed to help the state with this unusual burden by making a good faith contribution.”
“At H&R Block, we do the right thing. Nothing is more important than helping our clients to file an accurate tax return,” said Heather Watts, H&R Block’s Vice President of digital DIY products. “Once the problem was identified, we worked quickly to assist our clients and with Vermont officials to rectify the situation. In light of these unique circumstances, H&R Block is proud to make a good faith contribution to the Vermont General Fund.”
Taxpayers who believe they may have been impacted by the 2015 vendor software errors can find further information on our website at www.tax.vermont.gov or contact the department at 1-866-348-4038. Any impacted taxpayer who already sent the department their amendment and payment related to the IN-155 errors will receive a refund from the department. Those who have not yet amended need not take any further action. Any taxpayer who correctly submitted an IN-155 and paid the correct tax amount before April 15, without amendment, is not impacted. Likewise, extension filers whose return is due by Oct. 15 are also not considered impacted.
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Background on VTax:
The Vermont Department of Taxes is in the middle of a successful implementation of our IT project, VTax. VTax is a modernized integrated tax system; it will provide a modern electronic platform to handle all aspects of taxpayer interaction for all tax types. Among other things, VTax will allow the department to provide modern customer service, including e-services, and enhanced security.
When completed in December of 2017, all tax types will be managed in this one system allowing the department to shut off the three legacy systems.
As of July 2016, the department has successfully implemented the first two phases of the project - corporate and business income, sales and use, meals and rooms, withholding, fuel gross receipts, bank franchise, and a couple other smaller tax types. After those successful launches, the department is now working to implement the personal income tax for a scheduled launch in December 2016.