Montpelier, May 16, 2016 – The Vermont Department of Taxes has learned of some errors in the coding of Vermont 2015 tax year personal income tax software impacting some taxpayers who itemized their deductions.
The department is working with software vendors and tax preparers to ensure that affected taxpayers receive assistance in filing amended returns and paying any additional taxes. The department is also waiving interest and penalty for amended returns and payments received on or before June 30, 2016.
The department’s internal analysis suggests that products from five vendors had software glitches, causing as many as 19,000 taxpayers to file erroneous 2015 returns. The additional tax due ranges greatly, but averages about $160, for a total of about $2 million.
“Our error rate for e-filed returns is generally much lower than for paper returns. It is highly unusual and unfortunate to have commercial software errors impacting so many taxpayers. We have been working with vendors and preparers to make the amendment process as smooth as possible,” said Mary Peterson, commissioner for the Department of Taxes.
The errors involved tax changes in 2015 found on Form IN-155. Form IN-155 includes:
• Addback of any deduction on the federal return for state and local income taxes (Part A)
• Cap of the amount claimed for certain other deductions (Part B)
Only taxpayers who itemized their deductions were at risk for this error. Taxpayers who itemized deductions at the federal level, and therefore filed a Schedule A with their federal return, should have filed a Vermont Schedule IN-155 with their Vermont income tax return. Coding errors caused itemizers in some instances to bypass the IN-155 entirely or in part, resulting in an erroneous return and generally an underpayment of taxes. Notably, filers of the 1040EZ were not impacted.
A taxpayer who itemized and used commercial software to prepare their own returns can:
• check to see if their particular product is listed on the department’s website at www.tax.vermont.gov.
• review the Vermont return to see if it included the IN-155 form and whether both Parts A and B were completed.
Software vendors and practitioners have already advised some taxpayers of the steps needed to correct the return and pay any additional taxes. The department also is working with software vendors to streamline their processes for amending to make it easier for their customers.
If taxpayers have any questions, they should call their software vendor or preparer, who will have the return information necessary to assist in amending the return. The department will not have a complete set of return information until late in the year to provide individual assistance. However, FAQs are found on the department’s website at www.tax.vermont.gov.
The department will:
• waive interest and penalties on amended IN-155 returns and payments that are received on or before June 30, 2016.
• waive penalties until Oct. 15, 2016.
• send bills to address uncorrected returns after Jan. 1, 2017, at which time, both penalties and interest may apply.
The department reminds taxpayers to beware of spoofing.
• Spoofing is a scam where emails that appear to be from a trusted contact seek personal information such as Social Security Number, W-2 wages or passwords.
• Do not be fooled into providing such information in an email response or by clicking on an attachment that leads to a phony website.
• When in doubt, you should initiate correspondence to ensure the authenticity of the recipient on the other end.