This is not a complaint, but just a few friendly recommendations that Intuit could use to make its software more accurate for the end user. As many are aware, a number of states allow localities to charge local income taxes or fees. The type of localities and type of income subject to these taxes varies from state to state. Also, some states (New York, Maryland, Indiana, Iowa) include these local taxes on their state form, but others (e.g. Pennsylvania, Ohio, Michigan) require the filing of a separate local income tax return.
While TurboTax does include some of these local forms, it omits others. That is understandable given the fact that some of these localities have their e-filing system incompatible with TurboTax. However, with the exception of Ohio, TurboTax fails to inform the user of the existence of these additional forms. It would courteous and advantageous for Intuit to at least make an effort to inform the customer of these taxes, as a number of your customers have received penalty notices from local tax authorities for failing to file.
Here is a state-by-state summary of what I would improve:
1) Pennsylvania. A state with one of the most perverse local tax filing system in the country (and probably the world). Municipalities and school districts levy earned income and local services taxes, but these taxes are collected by private tax collectors determined by the county (which does not levy taxes itself). The City of Philadelphia has its own tax collection system, which is also horribly confusing. TurboTax's PA state return questionnaire mentions nothing about this ridiculous system. In light of this, I would include the following statement at the end of the PA state return questionnaire:
Municipalities and school districts in Pennsylvania levy a local earned income tax, based on where one lives, and a local services tax, based on where one works. These taxes are collected by private earned income tax collectors selected by your respective county. If your municipality or school district levies an earned income tax, you are most likely required to file a local earned income tax return, independent of whether you actually earned income or not.
You may also need to pay the local services tax (a flat fee for the privilege of working in a particular municipality or school district) if it was not withheld from your pay. However, you may be eligible for a refund of the local services tax if your income did not exceed a certain threshold.
TurboTax is unable to process local earned income tax returns or local service tax payments or refunds. You can find your local earned income and local services tax collector and rates by following this link: http://munstats.pa.gov/Public/FindLocalTax.aspx
Please note that the City of Philadelphia collects its own taxes and uses a different tax system. You are required to file an earnings tax return if you lived or worked in Philadelphia and your employer did not withhold the Philadelphia wage tax from your pay. You are also required to file and pay a net profits tax if you were a self-employed resident of Philadelphia. If you had earnings from business or self-employment from Philadelphia, you may be required file and pay a business income and receipts tax. Finally, certain forms of passive income (certain interest and dividends, rentals, etc.) are taxable and must be reported on the School Income Tax return. You may find out more about these taxes by going to the Philadelphia Department of Revenue website: https://beta.phila.gov/services/payments-assistance-taxes/.
2) Delaware. The City of Wilmington has an earned income and net profits tax. You may include the following statement at the end of Delaware state tax return questionnaire:
The City of Wilmington has a local earned income and net profits tax. A local earned income tax must be filed and paid if your lived or were employed in Wilmington and your employer did not withhold the Wilmington wage tax. You may need to file and pay the Wilmington net profits tax if you reported income on federal schedule C (business and self-employment) or E (rental, royalties, partnerships, etc.), or had capital gains from the sale of business assets.
TurboTax is unable to process the Wilmington local earned income or net profits tax returns.You may find out more about these taxes by going to the City of Wilmington website: https://www.wilmingtonde.gov/residents/earned-income-tax-and-net-profits-tax.
3) Alabama. Include the following statement.
A number of municipalities in Alabama impose a local occupational tax. This tax is imposed on those working in the municipality and/or county
and is usually withheld from your paycheck by the employer. If you
employer did not withhold the correct amount, you may be required to file and pay the occupational tax to your municipality.
TurboTax is unable to process local occupational tax forms.You may find
out more about this tax by going to the website of your
municipality.
4) Kentucky. Include the following statement.
Many counties and municipalities in Kentucky impose a local occupational license tax. This tax is imposed on those working in the municipality and/or county and is usually withheld from your paycheck by the employer. If you employer did not withhold the correct amount or you were self-employed or received rental income, you may be required to file and pay a net profits tax to your county and/or municipality.
TurboTax is unable to process local net profits tax returns.You may find out more about this tax by going to the website of your county and municipality.
5) West Virginia. Include the following statement.
A number of municipalities in West Virginia impose a local city service fee. This is a flat fee imposed for the privilege of working in the municipality
and is usually withheld from your paycheck by the employer. If you
employer did not withhold the correct amount or you were self-employed, you may be required to file and pay the city service fee to your municipality.
TurboTax is unable to process city service fee tax forms.You may find
out more about this tax by going to the website of your
municipality.
6) Ohio. Good job here! TurboTax handles local income tax forms for municipalities that hire RITA and CCA as their tax collector. TurboTax does not process local income tax forms for municipalities that collect the tax for themselves (and neighboring villages and small towns, as in the case of Columbus). You may want to warn the customer that some municipalities require every resident over a certain to file a return, independent of whether they had any income.
TurboTax also includes SD-100, the school district tax form, a separate form issued and processed by the state.
7) Michigan. Excellent job here! TurboTax allows customers to file taxes for all 22 Michigan municipalities that impose the city income tax.
😎 Missouri. St. Louis and Kansas levy and collect an earnings tax on those living and/or working in those cities. TurboTax fails to mention this. Include the following statement:
St. Louis and Kansas City levy a local earnings tax on those living and/or working in their respective cities. A
local earnings tax must be filed and paid if you lived or were
employed in St. Louis or Kansas City and your employer did not withhold earnings tax. You may need to file and pay the St. Louis and Kansas City business earnings tax
if were self-employed and lived or worked in St. Louis or Kansas City.
TurboTax is
unable to process the St. Louis or Kansas City earnings and business earnings tax returns.You may find out more about these taxes by going to the respective websites of St. Louis (
https://dynamic.stlouis-mo.gov/collector/earnings-tax-forms-info.cfm) and Kansas City(
http://kcmo.gov/tax/tax-home/).
9)
Kansas. Excellent job here. The program mentions the local
intangibles tax, levied by some counties and municipalities, which is reported on a separate state-issued form (filed with the county clerk).
10)
Colorado. Include the following statement.
A number of municipalities in Colorado impose a local occupational privilege tax. This is a flat fee imposed for the privilege of working in the municipality
and is usually withheld from your paycheck by the employer. If you
employer did not withhold the correct amount or you were self-employed, you may be required to file and pay the occupational privilege tax to your municipality.
TurboTax is unable to process occupational privilege tax forms.You may find
out more about this tax by going to the website of your
municipality.
11) Oregon. Good job here! TurboTax allows users to fill out Portland's arts tax form as well as the state-issued forms TM and LTD (to pay the transit self-employment tax to the Tri-Met and Lane County transit district, respectively). However, it fails to inform customers of transit self-employment taxes collected by municipalities or transit districts themselves (e.g. Canby Area Transit: http://canbyoregon.gov/transportation/transittax.htm; South Clackamas Transportation District: http://sctd.org/tax.html
You may want to include this statement:
A number of transit districts in Oregon impose their own income tax on self-employment income earned within the boundaries of these districts. If you had self-employment income in the Tri-Met or Lane County transit districts, you may file and pay these taxes through TurboTax.
However, TurboTax is unable to process transit self-employment tax returns for a number of transit districts that collect the tax themselves. You may want to check the website of the transit district in which you were self-employed. For a full list of transit districts in the State of Oregon, you may go to the website of the American Public Transportation Association:
http://www.apta.com/resources/links/unitedstates/Pages/OregonTransitLinks.aspx
