Late filers overwhelm TurboTax servers

IRS to give users grace period since Intuit's systems couldn't keep up

Last-minute electronic filers late yesterday swamped the servers at Intuit Inc., the maker of the popular TurboTax tax-preparation software and the Web preparation service of the same name. This morning, the company said that it was working with the Internal Revenue Service and that the agency would accept late returns without penalty.

A message posted last night on the Intuit Web site acknowledged the problem. "Intuit is working with the IRS and has notified them that throughput on our electronic filing system was not what we expected, resulting in a system slowdown. We encourage customers to continue trying to e-file as we continue to work on the issue."

TurboTax users flooded the company's support forums with messages about not being able to file their returns electronically. "My returns did not transmit successfully. I was told to try again. I did for four hours. Never got them through," said user DC-Taxpayer at midmorning yesterday.

Early today, Intuit updated a running message on its site that said it was clearing the backlog. "Outstanding issues with our servers have been resolved, and we are currently processing all customers' returns and requests for status checks at a normal rate," the statement read.

"We're still digging for the root cause, but clearly, volume was a huge factor," Julie Miller, an Intuit spokeswoman, said this morning. "It was at least [two times the volume of] last year's [filing date], and even our best planning couldn't anticipate that."

Miller said that Intuit's back-end systems -- those that process returns and then electronically file them -- were clearing the queue "at a brisk clip." She also encouraged users who had not been able to file last night to do so today. The IRS was also going to cut Intuit customers some slack, Miller said. "We're expecting the IRS to issue a statement momentarily that will give our customers a grace period to file," she said.

Intuit's fumble has made some users swear off e-filing in general and the company's products specifically. "Never again with TurboTax unless there is a full refund and the IRS accepts the return on time," promised orbiter just before midnight Tuesday. "One thing's for sure: I will not be E-filing for another 10 years, not with TurboTax or any other software or E-file service," said another user, identified as mattP.

Miller declined to go into specifics about how Intuit will reach out to affected customers. "We're going to get through the next couple of days, and then we will talk about how to reach out to impacted customers. We know that they are extremely frustrated and anxious. This is not the customer experience people come to Intuit for," Miller said.

Rival H&R Block Inc., which sells the TaxCut software and also provides a Web-based tax preparation service, said that while it also saw double the number of late filers yesterday compared to last year, its users experienced no e-filing problems. "We had no server issues," said spokeswoman Denise Sposato today. As to the reason for the last-minute rush: "I think people waited a little bit longer than usual," said Sposato, "because they knew they had two extra days."

In related tax filing news, the IRS yesterday granted a six-month filing and payment extension to those affected by the mass shootings at Virginia Polytechnic Institute and State University in Blacksburg, Va. The federal tax agency also gave people in the Northeast an additional 48 hours to file because of the disruptions caused by Monday's storm.

Copyright © 2007 IDG Communications, Inc.

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