S.C. state tax form contains error

Like any good tax preparer, Fred Fetner takes satisfaction in finding ways to save his clients some dollars.


Finding an error on a form itself? Well, that's a higher level of fun - especially when it could save the 80,000 South Carolina residents who work in other states about $150.

Earlier this year, Mr. Fetner received a call in his Rock Hill, S.C., office from fellow preparer David Ward, who thought he had a client overpaying on his return.

When Mr. Fetner investigated, he found what he thought was an error in the South Carolina instructions for computing the credit for taxes paid to another state. (For those at home, that's Line 1 of form SC1040TC.)

The error? Filers were told to count the other state's withholding tax as part of gross income.

"A deduction is supposed to be subtracted from income," Mr. Fetner said. "They were adding back a deduction."

Mr. Fetner sent e-mails to the South Carolina Department of Revenue. A state tax official told him he was mistaken.

Mr. Fetner, an IRS agent for 30 years, held firm. Finally, in February, Department of Revenue Director Ray Stevens called. Mr. Fetner was correct.

A member of his department had changed the instructions, Mr. Stevens said. The department has posted a correction on its Web site and mailed postcards to taxpayers who might claim the deduction.

Some Aiken-area tax preparers said their software programs caught the error before it became an issue.

Naresh Sharma, a certified public accountant in Aiken, said his office receives regular updates to its software, so the problem didn't affect the estimated 25 percent of his clients who work out of state.

The same was true for Robert M. Oswald, who operates his CPA business in North Augusta. He said he received the postcard warning, but the computer system had already corrected the problem.

"When we saw the first postcard that came out, we double-checked our computer system to make sure everything was working the way it was supposed to," he said.

Staff Writer Adam Folk contributed to this report.