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From: drears@ARDEC.ARPA ("1LT Dennis G. Rears", FSAC)
Newsgroups: mod.legal
Subject: Re:  Tax preparing software
Message-ID: <8606160938.aa22593@VGR.BRL.ARPA>
Date: Mon, 16-Jun-86 09:39:56 EDT
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Posted: Mon Jun 16 09:39:56 1986
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Paul Schauble writes:

>IRS I: The Internal Revenue Service has thrown a chill over the PC
>software business. It recently ruled that creators of computer programs
>that help taxpayers prepare their tax returns may be subject to
>penalties if the program gives bad advice. The ruling will put the
>software developers on the same footing as flesh-and-blood tax advisors:
>at risk.

     I would assume that the author of any program that a person can
reasonable rely on professional advice (law, tax, investment, etc)
could be liable for any damages that results from the reliance on
that advice.  I would also think that most disclaimers would be held
as worthless.  The question in this ruling is "Does a third party
have any recourse for possible damages?".  As far as the ruling 
goes (I have not read it or seen it) I wonder if the IRS makes a 
distinction between a program that actually gives tax advice as opposed 
to guiding a person into filling out a tax form.  
	I would be interested in the first case that reaches the tax 
courts to see if the IRS would win. Unlike a tax preparer the program 
author has no say on the final output of the return.  Also this would 
shift the the responsibilty of the tax return from the tax payer to 
a program. What if some programmer wrote a public domain tax program that
purposely gave bad tax advice, redid the tax tables, and did
assorted meyhem to the tax codes.  The programmer would then
distribute it over the multitude of bbn's and other forums.  Would
the IRS relieve the taxpayer of responsibility? Of course not.  The
IRS does not even relieve the taxpayer of responibilty if even one
of their agents give bad advice.  

>
>IRS II: TCS Software of Houston is already in trouble with the IRS. The
>company was contacted by the IRS because its tax-preparation software
>program, Client Tax Series-1040, was listed as the tax preparer on the
>1985 tax return of one Richard P. Jamerson.
>
>The IRS was up in arms because Mr. Jamerson had used a fictitous Social
>Security number, hadn't included a check with the tax return, hadn't
>signed the return or included a W-2 form.
>
>Fortunately for TCS, Mr. Jamerson owes no taxes since he doesn't exist.
>He is the totally fictitious example that goes out with the TCS package
>to show users how the software package works. Apparantly, one of the
>sample returns was inadvertently mailed to the IRS.
>
    Whoever sent that in to the IRS would be guilty of filing a
frivilous tax return.  I would doubt that the IRS could hold TCS
liable anymore than the IRS could be liable if I sent in their
sample tax return included in their tax guides.



Dennis

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