Adam C. Mansfield
Staff Attorney, Legal Services for Students, University of Kansas
The first time I logged into the TaxSlayer training lab I knew that this tax season was going to be a problem. It became obvious when I typed “1040NR” into the form lookup box in the upper left corner of the TaxSlayer screen and the search came up empty. Next I tried “1042-S” and “8843.” Same result. Now I’m not some old fuddy-duddy that doesn’t like change. I love working with new gadgets, software, or operating systems—as long as it does what it is supposed to do.
I work for Legal Services for Students at the University of Kansas. The main target population for our Volunteer Income Tax Assistance (VITA) grant is nonresident alien (NRA) students and scholars. Every tax year we help hundreds of international students and researchers determine their residency status, calculate any applicable tax treaty benefits, and prepare their federal and state returns. In the past, TaxWise has worked just fine for this purpose. I had no problem preparing a return for the student from Bangladesh who had income in both Kansas and Missouri or the Chinese student who has multiple 1042-S forms for scholarships and awards but still needs to apply treaty benefits to his or her wages. This year, TaxSlayer is just not up to the task.
I feel bad for Whitley, a member of TaxSlayer’s customer support squad, who is left with the task of informing me that they are aware of the “issue” that prevents their software from properly applying and reporting a tax treaty benefit on a nonresident alien return. She proceeded to tell me that they could only handle “simple” state returns in conjunction with an NRA return. This means that I can’t make any adjustments to the state return in order to properly apportion income. They are “working diligently to iron out the wrinkles.” Not being able to prepare a pretty basic nonresident alien return is a little more than just a wrinkle.
In 2016, the number of international students in the US topped 1 million. It is clear that the IRS intends for the VITA program to provide tax preparation services to this growing number of international students and researchers. There is Publication 4011—The Foreign Student and Scholar Volunteer Resource Guide. You can get certified to prepare Foreign Student returns on Link & Learn Taxes. There is even the Nonresident Alien Intake and Interview Sheet.
When the IRS issued Solicitation Number Q6QT0107C0000 for Electronic Tax Preparation and Transmission Software and Support, the very first functional requirement in the Statement of Work was, “All software proposed shall be capable of accurately preparing and filing any individual federal, state and local income tax returns for all possible tax situations prescribed by the IRS that may occur among those served by the VITA and TCE programs.” It goes on to require that, “[t]he software is capable of electronic return preparation for the following 1040 Series Family Forms—1040, 1040A, 1040EZ, 1040NR, 1040NREZ, 1040PR and 1040X.” It also prescribes the “[a]bility to prepare Federal, state and local individual tax returns for the previous three tax years.”
Somehow, TaxSlayer was awarded the contract based on the evaluation method of lowest price technically acceptable. I have no idea how its software was determined to meet or exceed all of the technical requirements. When you look at the Technical/Functional Requirements Verification form for the solicitation the “Does Not Meet” box should have been checked on at least line 1, 1a, 30, 37, and 39 of Task 1 solely due to the absence of fully functional NRA return preparation capabilities.
As it stands right now, a month into filing season and 16 months after the contract was awarded, TaxSlayer is not capable of preparing an NRA return and the corresponding state return(s) for 2013, 2014 or 2015. This means that it is also not possible to use TaxSlayer to amend any NRA return for the past three tax years. For 2016, the NRA option appears to be cobbled together at the last minute. It might be possible to prepare 2016 returns for an NRA student or scholar with TaxSlayer, but only if there are no treaty-exempt wages reported on a W-2 or changes necessary on the state return. In some cases, it doesn’t even matter how simple the NR or NREZ may be, if there is any additional information required by the state return then the software will not be able to properly prepare it.
TaxSlayer has claimed (in Q.26) that it has the ability to prepare Form 1040NR and 1040NREZ, but, despite my best efforts, I sure can’t get it to work for any of our clients that have treaty-exempt wages reported on a W-2. It will also not allow you to provide any additional information for a corresponding state return or to allocate treaty benefits properly between wages from multiple states. Any VITA site that prepares a significant number of NRA returns is going to have to purchase additional software. TaxSlayer does not do what is necessary to handle many of the electronic tax return preparation needs of the NRA students and scholars that depend on the VITA program to help them comply with their US tax obligations. It currently does not do what it was supposed to do in order to be considered technically acceptable.