Good Instincts At Intuit

Bruce Beasley doesn't fancy himself a consumer crusader. "I'm no Ralph Nader," he says bluntly. But when the 50-year-old Oakland (Calif.) sculptor stumbled upon a serious glitch in MacInTax, a version of the TurboTax package for the Macintosh, he complained to the program's developer, Intuit Inc. When the company brushed him off, he got angry enough to take his story to the San Francisco Chronicle--a phone call that helped ignite a national firestorm of controversy.

Shortly after the Chronicle's Mar. 1 expose appeared, a "deeply distressed" Scott D. Cook, Intuit's chairman, confessed that his company's line of tax software contained a number of bugs that could produce inaccurate calculations (table). With customers already surly over problems with Intuit's customer-service lines and its stock languishing on investor worries about Microsoft Corp.'s planned acquisition of the company, Cook moved quickly, offering to replace disks on request for Intuit's 1.65 million customers--despite estimates that the problems affect fewer than 1% of them. Block Financial Software Inc., makers of TaxCut, similarly offered its own "patch disk" several days later, when reports of problems with that package surfaced.

OVERBLOWN? The errors are no small problem--particularly to consumers who already have used the programs to prepare their taxes. Yet fears that the glitches would cause the burgeoning market for tax-preparation software to dry up overnight--and trigger massive liabilities for its developers--now appear to be overblown. CompUSA Inc. and Egghead Inc., two big software retailers, each report that sales of tax programs have remained robust. "It's been business as usual, which has been surprising," says Egghead buyer Jane Dunning.

How did the two companies emerge from the fiasco unscathed--or at least relatively so? Industry experts say that such bugs are inevitable in tax software. The reason: Programmers spend months or even years developing and refining products such as spreadsheets or databases. But, to reach retailers in time for tax season, the makers of tax software must quickly update the code for their products between October and January--the period during which the Internal Revenue Service discloses the latest changes in the law.

That leaves little time for the preliminary testing that could spot most problems. While Microsoft Corp., for instance, is expected to mail testers more than 400,000 "final beta" copies of its forthcoming Windows 95 program, Intuit and Block must rely largely on their own staffs for feedback. "I don't know of any other product developed under these kind of constraints," says Jeffrey Tarter, editor of Soft Letter, an industry newsletter. "It's a miracle there aren't any more bugs."

Management experts say that Intuit's aggressive response to the problems helped defuse a potentially disastrous situation. "The public loves a confessed sinner," notes William Bluestein of Forrester Research Inc. Along with the replacement offer, Cook penned an apology in a letter to the product's registered users: "We really let our customers down," he wrote.

And Intuit isn't hassling those customers who are demanding refunds. Indeed, Intuit has been so trusting that callers to its 800 phone lines aren't even required to provide proof of purchase. And it posted corrected versions of its tax programs on commercial online services, making them available to people who hadn't even purchased the original program.

So far, Cook's willingness to publicly swallow a serving of humble pie appears to be working: Only 75,000 of Intuit's 1.4 million users have requested a new disk, and about 3,000 people have downloaded the program from online services. As a result, William Blair & Co. analyst David Farina estimates that Intuit's $1.4 million charge to cover the replacement costs should be more than adequate.

Not everyone is content, though. Even an apologetic telephone call from Intuit President William V. Campbell and the offer of a replacement disk have not managed to mollify Beasley. "It has shaken my faith in the whole industry," he says. "Next year, I'm going back to my accountant."

Tax Bugs


-- Miscalculates 1995 estimated tax payments and income derived solely from disability payments

-- Creates errors in deductions for business use of a car

purchased in 1994

-- Miscalculates asset depreciation


-- Drops all but first two items from expense list imported from related program

-- Some versions create extra copies of tax forms, changing the tax liability

-- May enter a dependent for users who have no dependents

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