The issue affects customers who relied on a desktop version of the software meant for advanced users, the company said. TurboTax software is pictured in a Sam's Club in Pittsburgh, Pa., on Feb. 22, 2018.Gene J. Puskar/The Associated Press
Many Ontario families say they owe thousands of dollars in tax debt and interest because of a problem with the TurboTax software they used to file their annual tax returns.
Several dual-income couples with young children say they recently discovered that they received hefty overpayments of Ontario’s child care tax credit, sometimes over several years, after filing their taxes with TurboTax. The issue involves customers who relied on a desktop version of the software meant for advanced users, the company said.
Affected tax payers have recently received notices of reassessment from the Canada Revenue Agency, with some reporting they’ll have to pay more than $10,000.
The tax-filing service, which is owned by U.S.-based Intuit Inc. INTU-Q, says its software calculates the credit correctly based on the information users provide. But evidence reviewed by The Globe and Mail shows the program is designed to apply by default for the Ontario tax credit based on the income of the lower-earning parent, without automatically taking into account the income of the second parent, which must be added manually when applicable.
Failing to take into account the earnings of a second eligible parent can result in a family claiming credit amounts for which they don’t qualify.
The TurboTax software highlights possible issues for additional review by users before they file their tax returns. But for tax years prior to 2024, the program did not flag to users that there might be a problem with the Ontario tax form even if their household income was higher than the maximum eligible for the credit. The company said it has added warnings about the form for the current tax year.
TurboTax told The Globe it is offering to refund the cost of the software for affected users who contact its customer service. But it says those taxpayers aren’t entitled to reimbursement of any tax interest and penalties under its accuracy guarantee policy, because the problem wasn’t caused by a calculation error.
“I have a huge amount of empathy,” Stefania Mancini, a spokesperson for TurboTax Canada said, speaking of the affected households. “But there isn’t a glitch in the product,” she added.
The Ontario credit allows families with incomes of up to $150,000 to claim a portion of their annual child care expenses, with households eligible to receive up to $6,000 a child under the age of seven and up to $3,750 per older child up to the age of 16.
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One Facebook group created for taxpayers affected by the problem has grown to around 170 members, with users also sharing similar accounts on other social media.
Many parents say they’re scrambling to repay amounts they didn’t qualify for after unintentionally understating their household income using TurboTax.
“We’re just chasing our tails all the time to try to get to a point where we’re able to save some money, now we’re going to be at zero – our account is gonna be at zero – every month until this is paid off,” said Jana Rick, a registered nurse in North Bay, Ont., who has three children under the age of eight.
Her family received CRA notices in March showing they owe around $10,300, including nearly $2,200 in interest charges. While the tax agency has allowed them to repay the amount in instalments, the payments are still large enough that there is little extra cash at the end of the month, she said.
To cushion the financial blow, Mrs. Rick said she has picked up extra night shifts at work.
TurboTax said the issue is limited to the “Forms” mode of its desktop edition, which is intended for tax-savvy filers and doesn’t include as much guidance for users as other versions of the product. Each version of the software is certified by the CRA, the company also said.
For Ontario parents who claim a federal tax deduction for childcare expenses, the software also automatically claims the provincial childcare tax credit through a form called schedule ON479 – A. But in the advanced mode of the desktop edition users must manually add the income of a second parent who financially supports the children.
That’s because the software doesn’t assume two spouses living with a child under the same roof are both supporting the child, which may not be case in some instances – for example, in some blended families, according to TurboTax.
But several TurboTax users told The Globe they didn’t realize they had applied for the Ontario tax credit based on only one parent’s income when both spouses’ earnings should have been included in the claim.
Every family The Globe spoke to said they had annual earnings above the $150,000 income ceiling for the Ontario tax credit.
“I didn’t override anything,” said Carissa Krikke, an administrative assistant in Burlington. Ont., and mother of two, whose family was reassessed for a total of more than $11,500 for the 2022 and 2023 tax years.
All of the five taxpayers who spoke to The Globe about the issue said they have contacted TurboTax to make a claim under the company’s accuracy guarantee but have not yet had a definitive answer about whether they qualify for it.
The CRA did not respond to a request for comment by deadline.
Ms. Krikke said she and her husband decided to pay off their balance in a lump sum to avoid incurring any additional interest charges. But they had to borrow on a line of credit to do so, she said.
“We were planning on saving, we need to buy a new car, and that is in jeopardy,” she said.
