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By Steve Kelman

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A media double standard?

tax form and keyboard

Like other procrastinating Americans, I have been working the last few days trying to finish up my taxes. (Although unlike many Americans, I tend to be in the "taxes are the price we pay for civilization" camp.) I use H&R Block software to do my taxes, and as I was checking the 1040 that emerged from my efforts to answer the various questions the software prompts, I noticed something strange.

I own a number of stocks in foreign companies, where the government of the country deducts local income taxes on the company's stock dividends. In such cases, U.S. tax law allows taxpayers to take a tax credit corresponding to the taxes deducted by the foreign government. So, for example, if the foreign government deducts $100 in taxes, the taxpayer can take a $100 credit on his or her own taxes. (The taxpayer reports the dividend payment as income and pays U.S. taxes on it.)

The foreign tax credits are entered in the H&R Block interview system where you give the various items on 1099 forms for dividend payments. I dutifully entered these where relevant, on the line labeled "foreign tax paid."

However, at the end of the process I discovered to my surprise that the H&R Block system hadn't transferred these credits from the interview form to line 47 on the 1040, which shows foreign taxes paid, so they can be credited. My 1040 showed foreign tax credits of zero dollars.

So I called the company's customer service. To make a long story short – and this was a very long story, as I was on the phone probably for 45 minutes about this one problem, and I felt like I was educating the customer service representative on U.S. tax law as I was going along – there was a problem with the H&R Block software. They said they would share my problem with their tech team, but it would likely not be fixed for several weeks (well after April 15). I could bring in their live tax-filing helpers, but that service cost money. Also, they told me that if I changed any of the forms myself from what came out of the interview process, I wouldn't be able to e-file.

I have written before about problems that exist in the private sector as well as government but often get more attention when they are created by government. Frankly, I think a lot of people notice them more when they occur in the context of a government experience, because they correspond to the preconceptions most people have of what service from government vs. the private sector is like. Once that perception gets established, it gets confirmed by selective attention.

And that perception in turn is influenced by media coverage. This is another example of a problem that, had it occurred in government, would get covered by the media.

To be fair to H&R Block, there was one difference: the customer service rep told me that next year I could provide my call reference number, and H&R Block would provide me with next year's tax prep package for free.

Posted on Apr 11, 2013 at 12:09 PM


Reader comments

Tue, Apr 16, 2013

That specific provision may be straightforward, but I was speaking of the tax code as a whole. Congress takes some of the blame for this - during any session they can simplfiy it (or replace it with a sales tax), but do not.

Sun, Apr 14, 2013

Thank you Steve for pointing out this double standard with the media. Now a days it seems like federal employees can't do anything right and private sector does no wrong. Having worked for the IRS in my career, I can say for sure they would not have credited you the cost of this mistake next year, they would have given you the credit for the year of the error--this year. Public servants pay taxes too; when did we become the enemy?

Fri, Apr 12, 2013 Steve Kelman

Thankks commenters! However, I believe the provision in the tax code is pretty straightforward. If you pay foreign taxes on income, you get a dollar-for-dollar tax credit towards your US taxes. I never had a problem with this when doing my own taxes manually, or when I used a CPA. There is some software glitch in the H&R Block software that is preventing the transfer of reported tax credits on the 1099-B Dividends into their 1040 form. That's not the fault of the IRS (or even Congress).

Fri, Apr 12, 2013

Hello, Prof. Kelman- I fear you had the media double standard in your sights, but twitched and hit the overly complicated and almost universally despised tax code by mistake. This undermines your point because the tax code is a Government creature, and H&R Block just makes it possible for people to deal with it in a reasonable fashion. If one cannot generate a reliable tax return with H&R Block/TurboTax (see also Tim Geithner), then we have big problems.

Fri, Apr 12, 2013

thanks for the article Steve, but I have a different take. As taxpayers, we have a collective right to be miffed when government programs don't work or money is wasted...they wasted everyone's money! In the case of your H&R Block software, it was only your money that was wasted. Since I didn't feel the pain, I don't have a horse in the race.

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