Tax Software Programs -- Why Do They Round? (2024)

Why do the various tax software programs (at least H&R Block and TurboTax) round the entries to the nearest whole dollar? I cannot imagine it is to conserve computing power.

When I was younger and doing my taxes by hand, I would do the taxes both ways – with rounding and without rounding – and mail in the one that was beneficial for me. Of course the difference between the two for what I would be refunded or what I would owe would be no more than $0.50, but I was a grad student with nothing better to do, and I needed the money…

Why don’t the software programs offer the option to round or not round?

My guess would be that the main customer base for the tax preparation software is professional accountants and tax-preparers, who can save many seconds of tax form preparation by not typing three extra keystrokes for each of hundreds of entries per tax form, which makes the professional tax-preparers happy. If the software company gave an option for rounding or not, then many of the tax-preparer's customers would argue about whether to use rounding or not. So again, the main customers of the software, the professional tax-preparers, are happier if rounding is the default.

And I too, used to figure it both ways, when I was younger, filled out the forms by hand, and had more time.

I dislike that Turbotax seems to force you to round (or at least I have not found any way to get them to not round). Doing so makes it significantly difficult for me to check that I have no entry errors because the totals don't match my spreadsheets that I keep throughout the year for estimates and such.

If I'm wrong about them forcing me to round, please let me know!

depressed wrote: ↑Fri Feb 22, 2019 8:48 pm...significantly difficult for me to check that I have no entry errors because the totals don't match my spreadsheets

I mean it can't be off by more than a few dollars if you're looking at multiple rounded numbers added or subtracted. [OT comment removed by admin LadyGeek]

I ran my numbers through both TurboTax and FreetaxUSA, and everything looked basically the same except my total state tax was 2 dollars different. I assume that 2 dollars would have grown to maybe a dozen by the time I retire, and I'll run out of money about one hour sooner at the end of my life. Of course I saved like 30 times that using freetaxusa. Interestingly turbotax also had the wrong number for taxable interest, by 6 dollars, on the 1040 but the subsequent calculations seemed to use the correct number.

TaxAct used to round so much, the difference between their version and a spreadsheet version was over $15. In particular, they'd round small transactions on 1099-R to zero which caused the large variance. I was afraid I'd get audited for under reporting income, so I would re-do it by hand and submit that. YMMV.

I use other tax software now.

The IRS defines how to round-off dollars: Publication 17 (2018), Your Federal Income Tax | Internal Revenue Service:

Computations
The following information may be useful in making the return easier to complete.

Rounding off dollars.
You can round off cents to whole dollars on your return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.

For completeness, here's how to enter equal and negative amounts:

Equal amounts.
If you are asked to enter the smaller or larger of two equal amounts, enter that amount.

Negative amounts.
If you file a paper return and you need to enter a negative amount, put the amount in parentheses rather than using a minus sign. To combine positive and negative amounts, add all the positive amounts together and then subtract the negative amounts.

Mike Scott wrote: ↑Fri Feb 22, 2019 7:19 pmThe IRS recommends rounding numbers to the nearest dollar so....

Do you have a cite for that recommendation? The only things I can find are the 1040 instructions that say you can round. IIRC I read something in the US Code that said rounding was an election that the tax payer made by rounding on the forms I can't however find it again.

Negative amounts.
If you file a paper return and you need to enter a negative amount, put the amount in parentheses rather than using a minus sign. To combine positive and negative amounts, add all the positive amounts together and then subtract the negative amounts.

Someday if I'm really, really bored I'll line up all my math teachers as expert witnesses and follow those directions.