The trouble with TurboTax

The FTC and Sen. Elizabeth Warren say TurboTax has been tricking taxpayers into paying for tax prep for years.

Did you know the average American spends ~13 hours and $240 filing taxes? Ugh.

The trouble with TurboTax

Among tax prep services, Intuit’s TurboTax is king, holding 73% of the market share as of May 2021.

But the FTC and government officials claim TurboTax has been scamming us.

When free isn’t free

In March, the FTC sued Intuit, accusing it of deceptive ads for free tax filing — like this one that says “free” a bunch.

In reality, TurboTax’s free option is only available for some taxpayers, the complaint argues. For example, It doesn’t include anyone filing 1099s — so no gig workers.

People who start their “free” return enter info before being told they must upgrade, which can cost ~$60 to $119+.

But for 70% of US taxpayers…

… filing should be free, 1099s and all.

Back in 2002, the IRS made a deal known as the IRS Free File Program. It wouldn’t develop its own competing service if tax software companies offered free prep to low- and middle-income taxpayers.

This year, that’s an adjusted gross income of $73k.

But participation has historically been low — in 2018, ~3m of the ~104m eligible taxpayers took advantage.

Sen. Elizabeth Warren, Rep. Katie Porter, and Rep. Brad Sherman sent Intuit CEO Sasan K. Goodarzi a letter on Monday accusing Intuit of lobbying for the Free File program, then “scamming taxpayers into paying” anyhow by:

  • Obscuring the Free File program
  • Changing its name and landing page to create confusion
  • Funneling users into paid products

Though the IRS changed the deal in 2019 to allow the creation of its own service, it still doesn’t have one. And Intuit quit the program in 2021.

Now what?

Intuit plans to fight the FTC, saying its claims are “not credible,” and that its campaigns have led to increased awareness about free filing.

Meanwhile, the letter demands TurboTax answer several questions about its practices, while also calling attention to the Tax Filing Simplification Act.

It was 1st introduced in 2016, so it hasn’t exactly moved along, but it would direct the IRS to create a simple filing system that would let many taxpayers forgo tax prep altogether.

BTW: ProPublica has been reporting on this for years. Check out its extensive work here.

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