No Penalty for Tax Filers Hit by Glitch

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By JORDAN ROBERTSON
The Associated Press
Wednesday, April 18, 2007; 7:00 PM

SAN JOSE, Calif. -- Taxpayers who couldn't electronically file 11th-hour returns using Intuit Inc.'s TurboTax, ProSeries and Lacerte software won't be penalized for delays caused by the company's overtaxed servers, the Internal Revenue Service said Wednesday.

"We will do everything we can to assist taxpayers affected by the situation," said IRS spokesman Bruce Friedland. "If people couldn't e-file last night, we encourage them to file as soon as they can."

A record number of returns from individual taxpayers and accountants on Tuesday choked the Mountain View-based company's computers, leading to delays in customers receiving confirmation that their returns had been submitted successfully, Intuit spokeswoman Julie Miller said.

As the midnight filing deadline approached, the problem got worse.

Usually, it takes only a few minutes after hitting the submit button for TurboTax users to get a confirmation. By Tuesday evening, it was taking hours. Returns are not transmitted to the government until Intuit processes them and sends a notice to the taxpayer.

The company's server farm near San Diego processed more than a million returns Tuesday alone, twice the amount during the peak filing day last year, Miller said.

And once the system reached its capacity, many filers were simply turned away. The company said it will refund the $16.95 electronic filing fee for TurboTax users who experienced delays.

Intuit does not yet know how many people were affected, and it has not received reports of users mistakenly paying multiple e-filing fees as they tried to resubmit their returns.

Penalties for late filing start at 5 percent of the unpaid taxes per month, and max out at a total of 25 percent. The IRS said it would extend the deadline to midnight April 19 for people who encountered problems.

Customers lit up Intuit's online customer support forums with complaints, with some angrily swearing off Intuit's software altogether for future returns and others threatening to sue the company if they were penalized by the IRS.

Beyond Intuit's consumer products, the delays also hampered professional tax preparers who use the company's Lacerte brand software.

Wesley Fachner, a certified public accountant in Campbell, Calif., said the slowdowns started Monday and got worse Tuesday, with backups cropping up for nearly all of the 20 returns he filed those days. The system would alert him that the files were having trouble transferring, or were sitting in a queue behind other returns and weren't being processed.


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© 2007 The Associated Press

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