intuit H&R block
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merri ok
see corp bad actors
SEE NORQUIST
30 GOP LTR PP?
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Tax Day Could Be Easy. They’re Fighting To Make It Hard.
4 26
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[00:09:54] David Sirota: We'll be right back. Welcome back to Lever Time. It took another decade for this issue to pop up again. In 1998, democratic President Bill Clinton and the Republican Congress passed a law reviving the possibility of a return free system. That's right. Buried in an IRS overhaul Bill was a provision instructing the Treasury Secretary to quote, develop procedures for the implementation of a return free tax system.
This proposal sat at the IRS for the next few years until George w Bush's Republican administration took a baby step. They didn't implement return free filing. It was something much smaller than that. A proposal just to let you go online and file your taxes to the IRS for free.
[00:10:40] Ken Dam: Paying taxes is really a responsibility of every citizen, but because it's a responsibility, it doesn't mean it has to be arduous, slow, cumbersome, mysterious.
[00:10:53] David Sirota: This was Bush Treasury Department official Ken Dam, describing the initiative
[00:10:57] Ken Dam: Free File Promises to reduce the needless frustrations of millions of dutiful citizens. As they carry out this duty of citizenship, preparing and filing their tax returns,
[00:11:08] David Sirota: and yet even this simple idea really pissed off the tax prep industry.
Intuit, the owner of TurboTax launched a counter attack and mobilized, enlisting the help of a guy named Bernie McKay, a bigwig lobbyist, and former Carter administration official, who did a full court press on Capitol Hill. According to a ProPublica investigation, the industry basically argued that the IRS could not be counted on to roll out such a big program and the argument.
Really resonated with some folks on Capitol Hill. A group of Republican lawmakers wrote to the IRS claiming that there was no reason for the government to compete with quote well-established tax prep companies. The lobbying worked in 2003, the Bush administration and the tax prep companies made a compromise.
It was called the Free File Alliance. An IRS Blessed Consortium of Tax Prep Companies would help some taxpayers file their taxes for free. But the catch was in the federal contract. Which obligated the IRS to not compete with the consortium in providing free online tax return preparation and filing services to taxpayers
[00:12:22] Julie Story: crash and burn.
[00:12:24] David Sirota: Yep, another crash and burn. But after getting reelected. George W. Bush went back to the tax complexity fight once again. In January, 2005, he announced a whole new advisory panel to evaluate ways to simplify the tax system.
[00:12:40] George W Bush: These fine, distinguished citizens will be taking a good hard look at the tax code....
[00:13:22] David Sirota: The new advisory panel devoted an entire day of public testimony to reviewing Reagan's original return free tax filing idea, which seemed like a really encouraging sign.
We're going ballistic, ma. Go get 'em. But then came the testimony of anti-tax power broker Grover Norquist, a conservative then at the zenith of his political power in Washington. The transcript of the hearing shows him excoriating the idea in what would become a set of talking points that Norquist and others would repeat.
Over and over again in the ensuing years, it's like playing in Las Vegas. Norquist said the house sets the rules and the house has its fingers on the scales. Do you really want to go and argue with the IRS? If they've sent you a bill that's higher than you think it ought to be. It also gives the advantage just as the house in Las Vegas.
He said the interests of the government. Is to maximize its revenue. That testimony casting return free filing as a stealth tax increase, it set the idea back into another free fall. Sub controller, losing controller return free filing officially crashed and burned again when George w Bush's advisory committee left it out of its final report.
Then in 2007, Barack Obama picked up the cause of return free filing. The then presidential candidate was seemingly ready to fight the tax prep industry. ProPublica reported that Obama gave a speech to an audience full of tax wonks in Washington, where he said quote. The government already collects wage and bank account information, so there's no reason the IRS can't send Americans prefilled tax forms to verify.
This means no more worry, no more wasted time, no more extra expenses for a tax preparer. But Obama quickly learned his lesson too. The tax prep lobby was not to be messed with. Bernie McKay and the band of Intuit lobbyists got to work pushing Congress to introduce a series of bills to prohibit the IRS from building its own free tax filing system.
As campaign cash from the tax prep industry flowed to lawmakers, the public opposition was led in part. By Grover Norquist, casting it as a scheme to jack up everyone's taxes.
[00:15:42] Grover Norquist: When this is was done in other places, the government makes a lot of money. Why? Because when the government does your taxes for you, they maximize their revenue, not getting your tax returns accurate.
[00:15:54] David Sirota: That's Norquist in a newsmax interview from 2014.
[00:15:58] Grover Norquist: I think the idea of of having the government do your taxes for you is dead. Dead, dead. That's an important part of tax reform. Killing this idea of the government reaching out, knowing everything about you doing your taxes for you.
[00:16:12] David Sirota: When around this time, Republican lawmakers caught wind, that the IRS might be looking into a realtime data collection system that might later be needed for a return free system.
They pounced.
[00:16:24] IRS Oversight: This subcommittee has placed report language in our annual appropriations bills, by the way, since 2 0 9 Pro prohibiting the IRS from using any funds on a simple tax return pilot program.
[00:16:34] David Sirota: This was a Republican congressman interrogating Obama's IRS Chief at a congressional hearing in 2014.
[00:16:40] IRS Oversight: Are you aware of any further exploration and implementation by the IRS
[00:16:44] David Sirota: Obama's IRS Chief Quickly backed down.
[00:16:47] John Koskinen: The thing that has been the focus of a lot of external societies is the idea of could we pre-populate a return form, get information in pre-populate so you could look at it, and then you could make decisions or the IRS could even file your return for you.
We're not doing anything with that. We have no, uh, no program going forward that I know of, and, uh, certainly we don't intend to do anything like that without talking to you
[00:17:06] David Sirota: once again, after briefly taking flight, the idea of a return free tax system fell out of the sky. The
[00:17:13] Top Gun Clip: goddamn plane has creed into the mountains.
[00:17:17] David Sirota: There was of course, one more test flight as part of the 2022 Inflation Reduction Act that President Biden signed. The IRS budget was significantly increased after years of cuts, and the legislation included a new direct file system, which was rolled out in 2024.
[00:17:35] WPRI: This year, there is a new software pilot program being offered in 12 states called Direct File.
It opens to qualifying taxpayers in mid-March.
Your eligibility for direct file does not depend on your income.
[00:17:49] David Sirota: Direct file was a free online service that allowed taxpayers to file their federal tax returns directly with the IRS. Again, this wasn't return free filing. But it was the government's strongest attempt to at least give you a way to file your taxes without the added fees and shady upsells of private companies.
The program was run by the IRS itself, and it ended up being a policy experiment that went surprisingly well. It was rolled out slowly and intentionally so that issues could be seen and addressed quickly. At first, it was limited to really simple filings, and then additional tax complexities were added later on, making it more accessible to more and more taxpayers Overall, the pilot program showed.
Big promise with 94% customer satisfaction that gave a green light for the program to expand beyond the first 12 states it started in. But at this point, I'm guessing, you know what happened when Donald Trump won his second presidential term
[00:18:55] NBC10: starting 2026, the program will no longer be available for taxpayers.
President Trump has said he was looking into getting rid of direct file. He claimed it was. A waste of taxpayers' money because commercial tax preparation companies already offer free filing programs.
[00:19:12] David Sirota: The campaign to kill the successful and popular direct file program was fast and furious as soon as Trump won the 2024 election, nearly 30 house Republicans sent a letter to Trump in December, 2024, just after he'd won, asking him to end direct file on his very first day in office.
The lawmakers had raked in more than $1.8 million of campaign cash from, you guessed it, tax preparation companies and their proxies. Meanwhile, turbo Tax's parent company, Intuit, donated $1 million to Trump's inauguration. Direct file in a lot of ways had been the closest thing to what Ronald Reagan had proposed back in 1985.
...
As I've gone back and forth with my own accountant in this last few weeks, getting more and more annoyed at all the red tape, watching more and more of my time sucked away into a mountain of paperwork. I've been thinking a lot about this interchange on CNBC from a few years back.
[00:23:00] CNBC (Aaron Ross Sorkin): Grover, I wanted to ask you about this.
There's this bill out there, it seems bipartisan and I, I'm surprised by it.
[00:23:06] David Sirota: That was journalist Andrew Ross Sorkin asking anti-tax activist Grover Norquist, why he's fought return free filing for so many years.
[00:23:15] CNBC (Aaron Ross Sorkin): That effectively makes it a a, a permanent ban barring the IRS from ever developing its own online tax filing service.
This would've been. Uh, a free service that would've made paying taxes cheaper and easier, especially for people at the bottom and the middle who are spending, uh, in often cases, you know, several hundred dollars a year, it would actually be a tax cut for most Americans to do this. Why try to block something like that?
[00:23:41] David Sirota: Norquist first insisted that private tax prep companies do provide some free services to the very poor. And then Norquist went on a rant.
[00:23:49] Grover Norquist: The real goal of the Democrats, and we saw this in California, is they want the government to do your taxes for you. Yeah. Like Europe does. They send you a bill. Go ahead and argue with the government.
And when California put that together, you know what? They scored it as a significant revenue raiser 'cause they intended to, to write your tax bill. So it'd be higher than it than you would expect to pay. Now, this is a way to raise taxes. And to completely strip you of all privacy. So
[00:24:15] CNBC (Aaron Ross Sorkin): grow, grow
[00:24:15] David Sirota: Sorkin though, press there.
[00:24:17] CNBC (Aaron Ross Sorkin): Do you have any ideas of how to make it easier and cheaper? Mm-hmm. For American taxpayers to pay their taxes so it doesn't cost them any more money than it already does. It'd just be so much easier. Who, people who are W2 filers, they get a postcard. It says what, what the number is. You either sign it or you, or you go off and you do your own, you do your own tax plan.
[00:24:37] David Sirota: Norquist then started reciting more anti-tax talking points as usual, casting the IRS as a rapacious monster.
[00:24:45] Grover Norquist: The federal government takes about 18% of everybody's money. There's no pleasant, cheap, easy, or uncomplicated way to do that. You want simplicity, you want fairness, make the tax bill lower,
[00:24:56] David Sirota: and that's when Sorkin just scream the quiet part about the whole issue.
[00:25:01] CNBC (Aaron Ross Sorkin): You have no, um, rival idea about how to make it easier for Americans to pay their taxes. I want their tax because I think ultimately your idea is to make it harder for people to pay their taxes so they hate their taxes and push for lower taxes.
[00:25:14] David Sirota: That's it right there. That's what's also underneath all of this, beyond just the tax prep companies wanting to protect their profits, there's a powerful arch conservative, anti-tax movement that wants you to hate literally everything about taxes, and so they've succeeded.
In creating an awful tax process. But I wanna go back to something I alluded to at the beginning. Taxes are not theft. As the anti-tax movement likes to insist. Taxes are the necessary price we pay for a functional society. It's what we pay for roads, bridges, water systems, schools, and all the stuff we call civilization.
What is theft? Is politicians helping giant corporations steal our money and our time just to file our taxes. So as the tax filing deadline approaches, as some of you are stressed out. By Byzantine filing forms or the fear of paying more than you owe or of being audited for a simple mistake, don't forget it does not have to be this way....
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an 12 24
At least 27 House Republicans are urging President-elect Donald Trump to end the Internal Revenue Service's Direct File program as soon as he returns to the White House and begins his second term. But Direct File also has plenty of supporters, including MSNBC's Hayes Brown.
In an opinion column published on December 15, Brown argues that House Republicans have a motivation for wanting to abolish Direct File: making it more "painful" for Americans to file their taxes.
"In the fall of 2023, the Internal Revenue Service announced a pilot program that would allow some Americans to file their taxes directly to the agency — for free," Brown explains. "The Direct File service managed to go against at least a half-dozen federal government stereotypes: it was new and novel in a system that loathes change, it allowed people to be more efficient with their time, and the people who used it this past tax season had plenty of good things to say about their experience."
READ MORE:[New Kristi Noem proposal would fund Christian ‘segregation academies’
Brown adds, "In May, the IRS said the program would be expanded and made permanent. But of course, there are Republicans who would like nothing more than to strangle a popular government initiative in its cradle."
According to Brown, House Republicans who oppose Direct File believe that abolishing the program will make it easier for their party to carry out tax cuts for wealthy Americans.
"The more friction in the system, the more visible of a target the IRS becomes for average Americans," Brown explains. "The more people who are frustrated with the IRS, the better their case for cutting even more taxes for the wealthy. It also doesn't hurt to be in the good graces of massive tax preparation companies like Intuit, which have spent years and millions of dollars to ensure that filing taxes is as painful a process as possible. Among the reforms they blocked was a plan to go further than Direct File, letting many taxpayers file pre-populated forms for free."
Brown continues, "The net effect is that there's no upside to murdering Direct File ahead of tax season beyond making the federal government less responsive and useful in the eyes of Americans. Republicans can falsely claim that they're trying to save taxpayers' money from the clutches of the IRS. It's clear what they're really trying to claw back is a massive refund of Americans’ time and energy in the name of making everything a little bit worse."
READ MORE:['Trump ’28': Bannon calls for third term
*Hayes Brown's full MSNBC opinion column is available at this link.
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https://www.alternet.org/2020/09/the-ftc-is-investigating-intuit-over-turbotax-practices/
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4 24 judd
Yesterday was the last day for Americans to file their 2023 taxes on time. What is the biggest difference between Tax Day this year and Tax Day in 1980? Millionaires pay a lot less.
Between 1945 and 1980, American households that made $1 million or more paid an average of 50.1% of their income in federal taxes, according to a new report from Americans for Tax Fairness. This period following World War II was characterized by "substantial economic growth and broadly shared prosperity" with rapid income growth "at roughly the same rate up and down the income ladder." Higher taxes for the wealthy funded "public investments that helped build a thriving economy for all: constructing the interstate highway system, improving public education, facilitating mass home ownership, expanding healthcare coverage."
According to the most recent IRS data, American households with more than $1 million in income now pay an effective tax rate of just 26%. Yes, because of inflation, $1 million has less purchasing power today than it did 44 years ago. But $1 million still exceeds the income of 99.5% of American households.
While millionaires have seen their tax rates halved, the tax rate for non-millionaires has been fairly consistent. Between 1945 and 1980, the average effective tax rate for non-millionaires was 12.6%. Today, it is 11.5%.
In 2001, the IRS started tracking the effective tax rate of American households that make $10 million or more. They have a slightly lower effective tax rate than other millionaires.
The gap in effective tax rates between those American households that make $10 million or more and those that make seven figures likely reflects how the tax code imposes higher taxes on work than wealth. Seven-figure earners typically earn much of their revenue through income from high-paying jobs, and the top marginal income tax rate has ranged between 35% and 39.6% over the last two decades. Those who earn $10 million or more commonly derive some or all of their income through investments, which have been taxed between a 15% and 23.8% rate over the same time period. That's why the top 0.0001% — the 1500 richest households in America that make $118 million or more — pay an effective rate of just 23%. That's less than the regular millionaires.
The reality is that today, the American tax code barely qualifies as progressive. The Institute on Taxation and Economic Policy (ITEP) produced a study this month that looked at taxes paid at all levels (federal, state, and local) by income. ITEP found that the wealthiest 1% of American households collected 20.1% of total income and paid 23.9% of total taxes. The poorest 20% of American households collected just 2.6% of total income but paid 1.5% of total taxes.
grph
While the federal tax code, despite the dramatic reduction in rates for millionaires over the last several decades, remains progressive, "state and local taxes in most states are regressive, meaning they take a larger share of income from the poor than from the rich." Many states and localities impose sales taxes and "low-income families have little choice but to spend all their income to cover basic needs." High-income families "can save and invest most of their income, avoiding sales taxes."
Using impoverished children as political pawns
In 2021, as the pandemic still raged, Congress instituted a historic expansion of the Child Tax Credit (CTC). The CTC was increased from $2,000 per child to $3,600 for each child aged five or younger and $3,000 for each child aged 6 through 17. (The credit phased out for couples making $150,000 or more and individuals making $75,000 or more.) The credit was also made fully refundable, which means even families with little or no income could benefit. It was paid out monthly so that families did not have to wait until Tax Day to see the benefit.
The policy was a smashing success. Child poverty plunged to 5.2%, a record low. But due to the opposition from corporate lobbyists, Republicans in Congress, and Senator Joe Manchin (D-WV), the CTC expansion expired at the end of 2022. Child poverty quickly increased, spiking to 12.4% in 2022 — that meant 5.28 million additional children living in poverty.
Since then, there has been bipartisan interest in reviving at least some of the CTC expansion. Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO) struck a deal to make the credit refundable for more families. It is a modest and technical change, but it would help about 16 million low-income families with children, with an average benefit of about $630. To attract Republican support, the deal included some business tax cuts, passed in 2017, that had expired or were close to expiring.
The Wyden-Smith package cleared the House at the end of January by a vote of 357-70. But for months, the Senate has done nothing.
Senator Mike Crapo (R-ID), the senior Republican on the Senate Finance Committee, claims to be "negotiating" the package, which was already the product of a bipartisan negotiation. Crapo reportedly wants more generous corporate tax cuts and fewer benefits for impoverished children. But efforts to tweak the proposal have not changed Crapo's opposition or the other Senate Republicans following his lead. Wyden's impression is that the proposal is not "something that Senate Republicans wanted to do."
Why? Senator Chuck Grassley (R-IA) said he opposed the package because "passing a tax bill that makes the president look good… [and] means he could be re-elected." In a Wall Street Journal op-ed, Senator Thom Tillis (R-NC) said that expanding the CTC now means "all Republican leverage will be lost" on tax issues regardless of who wins the election. Defeating the Wyden-Smith package would "extend the bulk, if not all, of the Trump tax cuts" in the future. At the end of 2025, Trump's tax cuts for individuals would expire, raising the top income tax rate from 37% to 39.6%.
Crapo and other Senate Republicans, however, have not simply cut off negotiations because harming impoverished children for a chance to help corporations and the wealthy is not a good look politically. But the route they are taking has the same effect. They are killing a modest expansion of the CTC by running out the clock.
The lobbyists who want you to keep paying to file your taxes
Earlier this year, the IRS launched its first-ever free tax filing program, Direct File, in 12 different states. The program, which is funded by the Inflation Reduction Act, is still in its pilot stage.
At least 100,000 taxpayers used the program to file their federal income taxes this tax season, and so far, the results are fairly encouraging. It’s estimated that in five years, “Direct File would save the average user $160 in filing fees and hours of their time each year, which saves Americans a total of $11 billion annually between filing fees and time costs,” according to a study by the Economic Security Project.
Direct File also makes it easier to claim credits like the CTC. According to the Economic Security Project, the program would “deliver up to $12 billion each year in additional tax credits to low-income families currently missing out.” The group also calculated that the program would generate at least $300 million in savings for the IRS.
Despite its immense potential and early success, tax preparation companies “are continuing to blast Direct File as unpopular and unnecessary.” A lawyer for the American Coalition for Taxpayer Rights – a trade group that represents tax prep giants like TurboTax and H&R Block – told the Washington Post that there is “not a real demand” for the program. But this is misleading. More than70% of taxpayers said they would be interested in filing their taxes through a free, IRS-provided online tool, according to the IRS’ 2022 Taxpayer Experience Survey. Polls across different states also show that a “massive majority” of Americans, including both Democrats and Republicans, support a free IRS tax return system.
For years, tax prep companies have spent millions of dollars blocking efforts to make tax filing free and easy. In 2019, ProPublica reported that Intuit, the maker of TurboTax, spent 20 years blocking an IRS-provided e-file service – all while tricking low-income taxpayers into paying for services the company was federally obligated to provide to them for free. Last year, the company spent a record $3.8 million lobbying the federal government. “[M]any of Intuit’s disclosures say it lobbied on the implementation of the Inflation Reduction Act,” Sludge and More Perfect Union reported.
So far, there has been some accountability. In 2022, Intuit agreed to pay a $141 million settlement to roughly 4.4 million Americans, most of whom were low-income. Most recently, in January, federal regulators ordered the company to “stop marketing its services as free, unless they are free to everyone or exceptions are clearly disclosed.”
Still, problems persist. This month, Senator Elizabeth Warren (D-MA) wrote a letter to the Federal Trade Commission, urging the agency to continue investigating the tax prep software. “Despite lawsuits and settlements stemming from Intuit’s deceptive ‘free’ advertising practices, the company continues to relentlessly upsell TurboTax users,” Warren wrote. “The TurboTax website attempts to divert taxpayers away from free filing options early in the process – and continues to do so throughout their federal and state tax filings.”
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IRS Reforms Free File Program, Drops Agreement Not to Compete With TurboTax
The changes come after ProPublica’s reporting showed how TurboTax maker Intuit tricked customers into paying for tax prep they could have gotten for free.
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customers were tricked into paying to file their taxes — and now TurboTax is under investigation
https://www.alternet.org/2019/10/inside-turbotaxs-20-year-fight-to-stop-americans-from-filing-their-taxes-for-free/
no lnx
Inside TurboTax’s 20-year fight to stop Americans from filing their taxes for free
Written by Justin Elliott / ProPublica October 17, 2019
Last fall, Intuit’s longtime CEO Brad Smith embarked on a farewell tour of the company’s offices around the world. Smith had presided over 11 years of explosive growth, a period when Intuit had secured its place in the Silicon Valley pantheon, and the tour was like a long party.
In Ontario, employees wore T-shirts with Smith’s quasi-spiritual sayings: “Do whatever makes your heart beat fastest” and “Repetition doesn’t ruin the prayer.” In Bangalore, India, workers put on Smith face masks as they posed for selfies with the man himself. Fittingly, the tour culminated in San Diego, the home of TurboTax, the software that transformed the company’s fortunes. There, Smith arrived at his party in a DeLorean, and as he walked a red carpet, cheering employees waved “Brad is Rad” signs. To Smith’s delight, his favorite rock star, Gene Simmons of Kiss, emerged. The two posed for pictures, Simmons clad in black and the beaming CEO flashing the “rock on” hand sign.
Intuit began in the 1980s as an accounting software company focused on helping people with their bookkeeping. Over time, the company, like the other giants of Big Tech, cultivated an image of being not just good at what it did, but good, period. In a recent Super Bowl ad, Intuit portrayed itself as a gentle robot that liberates small-business owners from paperwork. The company stresses values above all, urging employees to “deliver awesome” and pursue “integrity without compromise.”
Intuit’s QuickBooks accounting product remains a steady moneymaker, but in the past two decades TurboTax, its tax preparation product, has driven the company’s steadily growing profits and made it a Wall Street phenom. When Smith took over in 2008, TurboTax was a market leader, but only a small portion of Americans filed their taxes online. By 2019, nearly 40% of U.S. taxpayers filed online and some 40 million of them did so with TurboTax, far more than with any other product.
But the success of TurboTax rests on a shaky foundation, one that could collapse overnight if the U.S. government did what most wealthy countries did long ago and made tax filing simple and free for most citizens.
For more than 20 years, Intuit has waged a sophisticated, sometimes covert war to prevent the government from doing just that, according to internal company and IRS documents and interviews with insiders. The company unleashed a battalion of lobbyists and hired top officials from the agency that regulates it. From the beginning, Intuit recognized that its success depended on two parallel missions: stoking innovation in Silicon Valley while stifling it in Washington. Indeed, employees ruefully joke that the company’s motto should actually be “compromise without integrity.”
Internal presentations lay out company tactics for fighting “encroachment,” Intuit’s catchall term for any government initiative to make filing taxes easier— such as creating a free government filing system or pre-filling people’s returns with payroll or other data the IRS already has. “For a decade proposals have sought to create IRS tax software or a ReturnFree Tax System; All were stopped,” reads a confidential 2007 PowerPoint presentation from an Intuit board of directors meeting. The company’s 2014-15 plan included manufacturing “3rd-party grass roots” support. “Buy ads for op-eds/editorials/stories in African American and Latino media,” one internal PowerPoint slide states.
The centerpiece of Intuit’s anti-encroachment strategy has been the Free File program, hatched 17 years ago in a moment of crisis for the company. Under the terms of an agreement with the federal government, Intuit and other commercial tax prep companies promised to provide free online filing to tens of millions of lower-income taxpayers. In exchange, the IRS pledged not to create a government-run system.
Since Free File’s launch, Intuit has done everything it could to limit the program’s reach while making sure the government stuck to its end of the deal. As ProPublica has reported, Intuit added code to the Free File landing page of TurboTax that hid it from search engines like Google, making it harder for would-be users to find.
Twelve years ago, Intuit launched its own “free” product: the similarly named “Free Edition” of TurboTax. But unlike the government program, this one comes with traps that can push customers lured with the promise of “free” into paying, some more than $200. Free Edition was a smash hit for Intuit and its pitch for “free” prep remains core to the company’s growth. Recently, it launched a “free, free free free” ad campaign for the Free Edition, including a crossword puzzle in The New York Times in which the answer to every clue was “f-r-e-e.”
Intuit knows it’s deceiving its customers, internal company documents obtained by ProPublica show. “The website lists Free, Free, Free and the customers are assuming their return will be free,” said a company PowerPoint presentation that reported the results of an analysis of customer calls this year. “Customers are getting upset.”
Intuit also continues to use “dark patterns” — design tricks to get users of its website to do things they don’t necessarily mean to do — to ensure that as many customers as possible pay, former employees say. A marketing concept frequently invoked at Intuit, which goes by the acronym “FUD,” seeks to tap into Americans’ fear, uncertainty and doubt about the tax filing process.
An Intuit spokesman declined to answer ProPublica’s detailed questions about its efforts to fend off a government filing system, but he provided a statement.
“We empower our customers to take control of their financial lives, which includes being in charge of their own tax preparation,” he said, adding that a “government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor and enforcer) the tax preparer is fraught with conflicts of interest.”
The IRS is seemingly the biggest threat to Intuit and other commercial tax prep businesses, but it has more frequently acted as the industry’s ally, defending the Free File program even in the face of critical internal reviews. The IRS declined to comment for this article.
The consequences of Intuit’s efforts affect a huge proportion of the taxpaying public. Americans spend an estimated 1.7 billion hours and $31 billion doing their taxes each year. Just 2.8 million participated in the Free File program this year, down from 5.1 million at the program’s peak in 2005.
Intuit’s success has made the men who run the company rich. Smith, the CEO who stepped down last year and is now executive board chair, had a stake worth $20 million when he became chief executive. It ballooned to $220 million by last year. Co-founder Scott Cook is now among the country’s wealthiest people, his fortune soaring to $3.3 billion.
This year, Intuit was close to realizing a long-held goal: enshrining the Free File program in law, effectively closing the door on the IRS ever creating a free tax filing system. But an outcry followed ProPublica’s reporting on the matter and Intuit’s treatment of its customers, prompting the provision to be dropped and state and federalinvestigations into Intuit’s practices.
Yet even after this setback, the company remained steadfastly confident that its clout in Washington would win the day.
“What we’re not gonna do is fight this publicly because that is exactly what they want us to do,” said Sasan Goodarzi, the new CEO, in a video released to staff this May and obtained by ProPublica. “We are actually working with the IRS and members of the Congress to ensure that the facts are very clear.”
Intuit has dominated the tax software market since 1993, when for $225 million, it bought Chipsoft, the San Diego-based company that had created TurboTax. Even then, TurboTax was the most popular option, but Intuit pursued a plan of aggressive growth. The product necessarily came on a disk, and by the end of the 1990s TurboTax boxes were nearly ubiquitous, on shelves in office supply stores across America.
As internet speeds increased and dot-com mania took hold, it became apparent that Intuit’s future was not in a box on a shelf. It was online.
The prospect of TurboTax’s growth was vast for another reason. As late as 2001, around 45 million Americans still filled out their tax forms on paper. For Intuit, those were all potential customers.
But Intuit wasn’t alone in seeing possibilities in the spread of high-speed internet. In Washington, lawmakers began pushing the IRS to modernize and get more taxpayers to file electronically. It was a no-brainer: Filing taxes online would be easier, and the IRS would save staff costs on processing paper returns.
The danger to Intuit’s growing business was obvious. If the government succeeded in creating a system that allowed the vast majority of taxpayers to file online for free, TurboTax profits would plummet. Intuit recognized that the notion of “return-free filing” was not going away on its own.
And so in 1998, the company hired Bernie McKay, a onetime Carter administration aide and a senior lobbyist at AT&T, to be its vice president for corporate affairs. Intuit executives like to talk about having a “customer obsession” in developing their products. McKay’s obsession is stopping government encroachment. Known to physically bang the table to drive home a point, McKay’s style is “aggressive to the point of offense,” said one fellow tax prep lobbyist. An Intuit spokesman said, “This mischaracterization of Mr. McKay is pure fiction.”
McKay, for his part, when asked at a recent tax industry conference which Star Wars character he is, responded, “Darth Vader.”
The year McKay was hired, Congress passed a major overhaul of the IRS. The bill, reflecting Intuit’s lobbying, said that the IRS “should cooperate with and encourage the private sector” to increase electronic filing.
While McKay came through in his first big test, in 2002, the company found itself up against an unexpected foe, the George W. Bush administration. The threat came from a broad administration initiative to upgrade government technology. One of the proposals called for the IRS to develop “an easy, no-cost option for taxpayers to file their tax return online.”
Without such an option, taxpayers were stuck either filing on paper or, to file electronically, paying a tax professional or software company like TurboTax. Providing an alternative would be an obvious improvement, said Mark Forman, an official at the Office of Management and Budget who led the “e-government” program. The technology wasn’t all that complicated, and creating a free, automated filing system would help tens of millions of Americans. “This was seen as a low-cost, high-payoff initiative,” Forman recalled in a recent interview with ProPublica. Standing in the way, he said, was an industry “that lives off the complexity of the tax code.”
Intuit revved its new lobbying machine. Even before the OMB report was publicly released, a group of Republican lawmakers, led by TurboTax’s hometown congressman, wrote to the agency arguing that there was no reason for the government to “compete” with the “well-established” private tax prep companies. Intuit’s lobbyists also went above the OMB and pressed their case directly to the White House, Forman recalled.
At the IRS, “all hell broke loose,” remembered Terry Lutes, who was then the head of electronic filing at the agency. Intuit’s clout on the Hill meant that lawmakers were soon accusing the IRS of making “secret plans to undercut the industry,” Lutes said. The agency ran the risk of seeing its funding cut if it were to pursue the Bush plan.
The IRS commissioner at the time, Charles Rossotti, also opposed the idea. The IRS’ customer service staff, already too thin to respond adequately to Americans’ questions about the tax code, would have to grow substantially to handle millions of software queries. Congress “will never give you sufficient funding,” Rossotti told ProPublica.
So the IRS felt caught in the middle. The question became, Lutes said, “Is there some way to come out of this with something for taxpayers that addresses the administration’s objective and at the same time is acceptable to industry?”
Intuit, it turned out, did have a way. Since 1999, as part of the company’s strategy to head off encroachment, TurboTax had been offering free tax prep to the poorest filers.It was a program that served to bolster the company’s arguments that government intervention was unnecessary.
This became the basis for a deal. The industry would offer free tax prep to a larger portion of taxpayers. In exchange, the IRS would promise not to develop its own system.
Intuit organized a coalition of tax prep companies under the name the Free File Alliance, and after negotiations with the IRS, the group agreed to provide free federal filing to 60% of taxpayers, or about 78 million people at the time. Government officials touted the solution as a marvel of public and private cooperation. Americans would get free tax prep, and it would cost the government almost nothing.
For Intuit, it was the culmination of years of lobbying. The IRS had signed a contract that said it “will not compete with the [Free File Alliance] in providing free, online tax return preparation and filing services to taxpayers.”
What’s more, “free” wasn’t as unprofitable as it sounded. The alliance, guided by a lawyer who was also an Intuit lobbyist, won a series of concessions that made the program palatable to industry. Free File only required the companies to offer free federal returns. They could charge for other products. The state return was the most common, but they could also pitch loans, “audit defense” or even products that had nothing to do with taxes.
Free File had another bright side: The companies could tailor their Free File offers so that they didn’t cut into their base of paying customers. The agreement said the industry had to offer free federal services to at least 60% of taxpayers, but each company individually only had to cover 10% of taxpayers. Intuit and the others were free to limit their offers of free tax prep by age, income or state.
There was little incentive for the companies to publicize a free alternative to their paid products, and the IRS agreed that the Free File offers need only be listed on a special page of the agency’s website.
For Intuit, it was a major victory in the war against encroachment. The company could now focus on turning whatever new customers it acquired through the program into paying users, both that year and in the future.
The first year of Free File was 2003, and for Intuit, things went well. On paper, the Free File Alliance was a collection of 17 companies, all of them vying to serve the American taxpayer. But in reality, it was a group made up of two giants and a bunch of gnats. Intuit’s only significant competitor was H&R Block, and even it was a distant second. The rest of the alliance consisted mostly of tiny companies with names like Free1040TaxReturns.com. As a result, Intuit could tailor its Free File offer just the way it wanted.
But the next year, Intuit began to lose control of its creation. A scrappy competitor, TaxAct, decided to use Free File to stand out. The company decided it would try to pick up as many new customers as possible and then charge them for ancillary services. Instead of following Intuit’s lead and constraining its offer to a subset of low-income taxpayers, TaxAct went the opposite direction.
“Why not go for an offer that’s much simpler to understand?”is how Lance Dunn, the president of the maker of TaxAct, described the strategy in a later court hearing. It began advertising a pitch for “free federal online tax preparation and e-filing for all taxpayers. No restrictions. Everyone qualifies.”
TurboTax’s offer on the Free File page, meanwhile, was more difficult to parse: “if you are eligible for EIC, are age 22 or younger, age 62 or older, or active Military with a W2.” (EIC stood for the Earned Income Tax Credit.)
TaxAct’s ploy was a smashing success. The company’s volume exploded.
Alarmed, Intuit tried to get the other companies not to offer their products for free to too many potential customers, according to Dunn. Such a request could be collusion, a violation of antitrust law, Dunn said. “Intuit asked the Free File Alliance members that we should restrict offers, which I believe is probably not legal for that group to restrain trade,” he said.
ProPublica asked Intuit about Dunn’s accusation, but the company did not respond.
Dunn, who declined to speak with ProPublica, made these remarks during sworn testimony in 2011. The hearing was part of an antitrust case by the Justice Department against H&R Block after it tried to buy TaxAct. The U.S. argued that, by eliminating a competitor, the merger would create a duopoly of Intuit and H&R Block. Although the Justice Department ultimately blocked that takeover, the market has grown even more consolidated in recent years. In 2019, according to a ProPublica analysis of IRS data, the two giants accounted for 81% of all individual returns filed using tax prep software.
On the defensive, Intuit and H&R Block matched TaxAct’s “no restrictions” offer on Free File. Americans rushed to file for free, and in 2005, 5 million people filed their taxes through the program. Free File had become the most popular way to file taxes online.
Intuit viewed the popularity of Free File as a serious threat and took its case to Congress. That year, Brad Smith, then a senior vice president at the company and head of TurboTax, told a House committee that “the current Free File Alliance program has drifted very far from its original public service purpose and objective,” as he put it. The program wasn’t supposed to be for everyone, he said: It was for the “disadvantaged, underprivileged and underserved taxpayer populations.”
Intuit’s arguments quickly gained traction at the IRS. Already, in March 2005, the IRS had written to the Justice Department for legal advice on modifying the Free File program. The agency wanted to know: Would it run afoul of antitrust laws if the IRS barred companies in the Free File Alliance from offering a free product to everyone?
The Justice Department responded in a May 2005 letter. Clearly, wrote Renata Hesse, an antitrust section chief at the department, “any agreement among Alliance members to restrict such free service is likely a form of price fixing” and thus illegal. But there was still a way for Intuit to get what it wanted. She wrote that if the IRS itself were to impose such a restriction, it would be legal.
The IRS swooped in to beat back Intuit’s competition, doing for Intuit what the company could not on its own. Despite just 5 million Americans using a program that was purportedly available to 80 million, the IRS agreed that Free File needed to be reined in.
The agency made its reasoning clear in a previously unreported letter sent to the Free File Alliance the following year. Bert DuMars, then head of electronic filing at the IRS, wrote that there’d been a huge jump in people using Free File in 2005, but no corresponding boom in people paying for tax prep. “If this trend continued, the IRS was concerned that it could cause many vendors to go out of business,” he wrote. Stock market analysts, he pointed out, had said Free File “represented a threat to future revenues and profits of the publicly traded company participants.” The IRS decided to remove this threat.
The new agreement, struck between the IRS and the alliance in 2005, gave Intuit what it had sought. Companies were now expressly barred from offering free tax prep to everyone through the program. Instead, only taxpayers under an income cap, then $50,000 a year, would be eligible.
On paper, the program’s eligibility had actually increased to 70% of taxpayers, or about 93 million households, up from the previous 78 million. But in practice, because broad, easy-to-understand offers were now barred, it was clear the program’s use would decline.
Intuit had again bent the power of the federal government in its favor. After 2005, the Free File program was never again as popular, eventually falling to about half that year’s level.
With the threat of government encroachment on ice and high-speed internet access proliferating in the mid-2000s, Intuit looked forward to steady growth and big profits. The upside of the online software business was huge, with the cost of producing each additional unit approaching zero. And TurboTax was hardly a niche product: Intuit executives still excitedly talk about the TAM, total available market, of TurboTax as every single tax filer in the country, now over 150 million households.
But TaxAct’s Free File gambit had forever transformed the industry. Advertising “free” was a great lure, so TaxAct took the battle to a different venue. Barred from making a free offer to everyone through Free File on the IRS’ website, TaxAct decided to make the offer on its own website in 2006. Intuit recognized a credible challenge from the upstart and countered the next year, launching TurboTax Free Edition on its website.
Confusingly, there were now two distinct options: the government-sponsored Free File and the commercial free editions.
For customers who managed to qualify, the new commercial options offered by these companies were similar to what they could get on the IRS’ Free File website: The underlying software was the same, only the federal return was free, and the companies expected to make money on each customer through charging for a state tax return or other services.
But for the companies, there was a clear benefit to winning customers directly, rather than through the IRS program. The companies had complete control over how they handled customers from start to finish.
Intuit poured ad dollars into its Free Edition. Not only did the new product effectively meet TaxAct’s challenge, it quickly became the major driver of TurboTax’s customer growth.
That growth posed a challenge: how to, as internal company documents put it, “monetize free.” Over successive tax seasons, Intuit unleashed teams of designers, engineers, marketers and data scientists on that problem, working at its headquarters in Mountain View and TurboTax’s main offices in San Diego.
Part of the solution was to pitch users side products like loans or “Audit Defense.” But it also meant misleading customers. Frequently “free” didn’t mean free at all. Many who started in TurboTax Free Edition found that if their return required certain commonplace tax forms, they would have to upgrade to a paid edition in order to file.
The company came to a key insight: Americans’ anxiety around tax filing is so powerful that it usually trumps any frustration with the TurboTax product, according to three former Intuit staffers. So even if customers click on “free” and are ultimately asked to pay, they will usually do it rather than start the entire process anew. Intuit capitalized on this tendency by making sure the paywall popped up only when the taxpayer was deep into the filing process.
“There’s a lot of desperation — people will agree, will click, will do anything to file,” said a former longtime software developer.
Every fall before tax season, the company puts every aspect of the TurboTax homepage and filing process through rigorous user testing. Design decisions down to color, word choice and other features are picked to maximize how many customers pay, regardless if they are eligible for the free product. “Dark patterns are something that are spoken of with pride and encouraged in design all hands” meetings, said one former designer. In the design world, “dark patterns” are tactics to get users to do something they don’t necessarily mean to do. (ProPublica previously documented dark patterns encountered by people trying to file their taxes for free.)
On TurboTax’s homepage, for example, the company carefully chooses how it describes the different editions. Prominently featured next to Deluxe Edition, which costs around $100, is the phrase “maximize your deductions.”
If users initially click on the Deluxe software, they are never offered the choice to go to the Free Edition even if the no-cost option would produce the same return. “Maximize your deductions” was legendary at Intuit for its effectiveness in steering customers eligible for free filing to buy the paid product, according to a former marketing staffer.
Another celebrated feature, former staffers said, were the animations that appear as TurboTax users prepare their returns. One shows icons representing different tax deductions scrolling by, while another, at the end of the process, shows paper tax forms being scanned line-by-line and the phrase “Let’s comb through your returns.” What users are not told is that these cartoons reflect no actual processing or calculations; rather, Intuit’s designers deliberately added these delays to both reinforce and ease users’ “Fear, Uncertainty, and Doubt.” The animations emphasize that taxes are complicated but also reassure users that the technological wizardry of TurboTax will protect them from mistakes.
In a statement, the Intuit spokesman said, “The process of completing a tax return often has at least some level of stress and anxiety associated with it. … To offset these feelings, we use a variety of design elements — content, animation, movement, etc. — to ensure our customers’ peace of mind.”
The 2007 launch of Free Edition started a period of rapid growth for TurboTax. Within two years, use of its web products had almost doubled, and over the past decade, its website has grown each year by an average of 2 million more customers. The company reported this year that TurboTax online had handled 32 million returns. In a statement, it said around a third of that number used Free Edition.
The government’s Free File program, meanwhile, has mostly faded into the background, drowned out by Intuit’s and other companies’ “free” offers. The IRS did try advertising campaigns, spending around $2 million some years to spread the word. But compared with the reach of Intuit, this was a pittance: The company reported this year that it spent $800 million on advertising. With its budget slashed by Congress, the IRS has spent no money at all to advertise the program in recent years.
Amid its success, Intuit has sometimes had to put down insurgents bent on reforming the tax filing system. In 2007, the same year Intuit launched its Free Edition, Barack Obama, then a candidate for president, took aim at the tax prep industry. In a speech to an audience of tax wonks in Washington, he promised that the IRS would establish a simple return system. “This means no more worry, no more waste of time, no more extra expense for a tax preparer,” he declared.
But the Obama administration, as Bush’s had before, found that it was no match for Intuit.
Again, Bernie McKay, the lobbyist who had joined Intuit in the late 1990s and outlasted multiple CEOs, led the company’s campaign. In response to the Obama threat, McKay and Intuit’s small army of outside lobbyists turned to Congress, where lawmakers friendly to the company introduced a series of bills that would elevate Free File from a temporary deal with the IRS to the law of the land.
Republicans have historically been the company’s most reliable supporters, but some Democrats joined them. Rep. Zoe Lofgren, the California Democrat whose district includes part of Silicon Valley, has introduced or co-sponsored five bills over the years that would codify the Free File program, with names like the Free File Permanence Act. Lofgren’s spokesperson told ProPublica that the congresswoman believes the IRS, because of its role as tax collector, should not also be the tax preparer.
Hedging its bets, the company also sought to make sure the IRS could not spend a single dollar creating a public filing system. One internal document says Intuit would “advance legislative language in House Appropriations for ‘No Funds’ restriction on IRS spending” on such a system. It worked. Within a few years, Congress passed a 3,000-page appropriations bill that included a single sentence crucial to Intuit’s financial future: “No funds,” the law decreed, could be used “to provide to any person a proposed final return or statement.”
Another important aspect of Intuit’s influence strategy during the Obama years was covertly enlisting minority and women’s groups to press its case.
The internal 2014-15 “encroachment strategy” document discloses plans to “leverage trade groups to support House/Senate Free File bills.” It goes on to list the groups Women Impacting Public Policy, The Latino Coalition and the National Black Chamber of Commerce.
Intuit has given money to all of those groups over the years. All have signed letters urging Congress to make the Free File deal permanent. “The Free File program has been a clear success,” said one letter signed by The Latino Coalition and the Hispanic Leadership Fund.
A spokesperson for Women Impacting Public Policy said it has received $70,000 from Intuit. The amounts given to the other groups are unknown, and they did not respond to requests for comment.
Company documents also outline plans to “mobilize” a “coalition” that included think tanks and academics, who published op-eds.
Will Marshall, president of the pro-business Progressive Policy Institute, opposed return-free filing in an op-ed in The Hill because doing one’s taxes is “a teachable moment [that] prompts us to review our financial circumstances.”
Anti-tax activist Grover Norquist, the most consistent champion of Intuit’s policy positions, warned that “big spenders in Washington, D.C. want to socialize all tax preparation in America.”
It is unclear whether they were paid by Intuit or the Free File Alliance.Norquist didn’t respond to a request for comment, and a Progressive Policy Institute spokesman declined to say whether Intuit gave the group money.
Whatever external challenges to the status quo Intuit has faced, the company has been able to rely on the IRS’ continuing enthusiastic support of the Free File program. Every few years, the IRS and the industry got together to renew the deal.
In part, that was due to the relationships Intuit had developed with high-ranking IRS officials. One, Dave Williams, served as the agency’s top negotiator on the Free File program for several years and “was very commercially sensitive,” said Mark Ernst, the CEO of H&R Block until 2007. Ernst, who later held a senior role at the IRS, told ProPublica that Williams “didn’t want to offend the industry,” noting that “he was particularly open to having sidebar conversations with key people where he could imagine himself landing some day.”
Today, Williams works at Intuit, where he’s held the title of chief tax officer since 2013. He is one of several former IRS employees who have gone on to work there. In a statement, Williams told ProPublica he did not have discussions about future employment with Intuit or other companies until after he left the IRS. He added that his career in government was focused on “what is best for the taxpayer” and that he “joined Intuit for the same reason: to help the American taxpayer.”
Despite Free File’s declining use, the IRS often claimed that the program was nevertheless meeting one of its original goals: driving more people to file electronically instead of on paper. Ernst, who served as a senior official at the IRS from 2009 to 2010, didn’t believe that a program used by so few people was having any such effect. “It was a talking point that got trotted out all the time to justify the Free File Alliance,” he said.
Internally, IRS managers have also argued that the program is, in a way, a success, because it created “a free marketplace,” as one internal management report in 2017 put it. Apparently, customers weren’t the only ones taken in by the word “free.”
In 2018, Intuit faced rare scrutiny from inside the IRS. The agency asked its Advisory Council, a group of outside experts, to take stock of Free File. To the company’s alarm, it soon became apparent that the council’s report might be sharply critical.
That July, council chair and University of California, Davis, law professor Dennis Ventry wrote two pieces criticizing an Intuit-backed bill in Congress that would make the program permanent. His op-ed in The Hill was called, “Free File providers scam taxpayers; Congress shouldn’t be fooled.”
In response, the IRS again rose to Intuit’s aid. It rushed to assure the company that Ventry’s power to affect the program was limited, according to emails to the Free File Alliance obtained through a public records request.
“The Commissioner has met directly with Mr. Ventry,” IRS official Ken Corbin wrote to Steve Ryan, a lobbyist for Intuit who also represented the alliance. “Mr. Ventry will recuse himself from participating or contributing to the topic of Free File.”
Corbin heads the IRS division that processes most Americans’ tax returns and negotiates the Free File deal with Intuit and the industry.
A few days later, Ryan arrived at the IRS’ Constitution Avenue headquarters in Washington to mount a defense of the program. A former Democratic Senate aide turned lawyer-lobbyist, Ryan is known on Capitol Hill for taking on politically fraught clients, including Trump attorney Michael Cohen and the government of Qatar. He helped create Free File in the early 2000s, and it was now his job to secure its future.
Ryan’s PowerPoint presentation at the IRS rehashed arguments that the company had been making for the past 15 years. It also highlighted a 2013 study by Brown University professor John Friedman, a former Obama National Economic Council official, to make the point that the program had been successful in generating “Free Tax Returns Outside of Free File.” The presentation did not mention that Friedman’s study was paid for by the Free File companies and was not published in an academic journal. Friedman declined to say what he was paid but told ProPublica he “wrote the piece based on my analysis of the issues, which I stand by.”
Ventry, who attended the meeting, got a call the next day alerting him that a California public records request had been filed for his emails — they were subject to such a request because he’s an employee of a state university. It came from the Free File Alliance, as The New York Times later reported. The request, Ventry believes, was designed to “freak me out.”
In early October, the council sent a version of its final report, which included a harsh appraisal of the Free File program, to the IRS to seek responses before releasing it publicly the following month.
But in mid-October, just weeks before the report saw the light of day, the Free File industry group fired off an “urgent” request to meet with IRS officials. The goal was to re-sign and “improve” the memorandum of understanding that governed the Free File program, according to the emails. The current agreement wasn’t expiring for another two years, but Ryan cited the “time urgency to make changes that will benefit taxpayers” in the coming tax season, adding, “I have not darkened your door in 2018 and need your … attention to this opportunity.”
The IRS’ Corbin signed the new deal on Oct. 31. Two weeks later, the Advisory Council report was released, with a damning indictment of the program: “The IRS’s deficient oversight and performance standards for the Free File program put vulnerable taxpayers at risk,” the report found.
The expert body recommended that the IRS negotiate a series of new provisions designed to increase the use and oversight of the program, including mandating advertising by the companies. But it was too late. A new deal had already been signed with modest changes. As it had in the past, Intuit and the alliance had effectively insulated the program from reform. Members of the council, Ventry said, were “pissed off.”
A spokesman for the Free File Alliance said the group had pushed to renegotiate the deal in 2018 because of the looming 2020 presidential campaign. “The reason for the timing of the extension of the agreement was the political season,” he said. The group had not seen the report before its release, he added.
(In August, ProPublica sued the IRS to get more correspondence between the agency and Intuit’s lobbyists. In response to our Freedom of Information Act requests, the agency has withheld over 100 pages. The case is ongoing.)
The new deal included rules that barred Free File companies from offering extra products to the relatively small number of users who access the program. This makes it much more difficult to convert those users into paying customers.
At around the same time, the industry took steps to make the program more difficult to find. Both Intuit and H&R Block added code to their Free File websites that shielded them from search engines such as Google. The Intuit spokesman said the company increased paid search advertising for Free File “by nearly 80 percent” over the last year and has data showing more people found the program through online search this year than last year, but he declined to provide specific figures.
What is clear is that Intuit’s business relies on keeping the use of Free File low. The company has repeatedly declined to say how many of its paying customers are eligible for the program, which is currently open to anyone who makes under $66,000. But based on publicly available data and statements by Intuit executives, ProPublica estimates that roughly 15 million paying TurboTax customers could have filed for free if they found Free File. That represents more than $1.5 billion in estimated revenue, or more than half the total that TurboTax generates. Those affected include retirees, students, people on disability and minimum-wage workers.
Customers, meanwhile, remain confused by Intuit’s myriad uses of “free,” and internal documents show the company knows it. Over just a two-week period this past filing season, Intuit received nearly 7,000 TurboTax customer calls in which the phrase “supposed to be free” was uttered, according to a company analysis. One customer complained that Intuit charged him even though “it says ‘free free free’ on the commercial.” The TurboTax representative responded: “That ad has been the bane of my existence.”
Even as TurboTax’s business thrived, 2019 has been a rocky year for Intuit’s long-running war against government encroachment. In April, the company was close to finally succeeding in its long-held goal to make Free File permanent. A bill called the Taxpayer First Act was sailing toward almost unanimous approval in Congress. But after ProPublica published a series of stories about the program, including a story showing that military families and students were particularly affected by Intuit’s business tactics, the bill stalled. Congress ultimately removed the provision that would have enshrined Free File in law.
After having enabled Intuit for so long, the IRS finally responded to the pressure. It hired a contractor to review the Free File program. But the contractor had previously argued against the IRS offering its own tax prep option, and the review did not recommend major changes. The agency has not yet announced its plans for the future of the program.
The agency’s inspector general also launched an audit, which is ongoing. Other investigations and litigation followed, ranging from class-action complaints, alleging that consumers had been deceived by Intuit’s tactics, to investigations and lawsuits by regulators and prosecutors in New York and California. Intuit has denied wrongdoing, saying it “has at all times been clear and fair with its customers.”
Despite the scrutiny, Wall Street has continued to embrace the company’s business model. The company recently announced it made $1.5 billion in profits for its fiscal year. It expects its TurboTax unit to grow by 10% next year. Last year the CEO was paid $20 million. The share price hit an all-time record.
The company has returned to its old strategy:stay the course and take its case directly to the IRS and Congress. Its allies in the Senate have again advanced an appropriations bill that would bar the IRS from developing its own tax filing system. In the spring, Sasan Goodarzi, a former head of the TurboTax unit who took over as CEO of the entire company in January, sought to reassure employees.
“Our view is this will be in the press until there is a resolution with the IRS,” he said, according to the video obtained ProPublica. “And we’re working with them and we feel very good about where this will end.”
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https://www.documentcloud.org/documents/6483061-Intuit-TurboTax-2014-15-Encroachment-Strategy.html
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An outside firm echoed ProPublica’s reporting but defended the oversight of the tax-prep program meant to help millions of Americans file their taxes for nothing.
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Industries Turn Freedom of Information Requests on Their Critics
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- Nov. 5, 2018
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WASHINGTON — Dennis J. Ventry Jr., a law professor at the University of California, Davis, drew the ire of tax preparation companies like Intuit and H&R Block this summer by criticizing a deal they have to provide a free tax filing service through the Internal Revenue Service.
The companies promptly hit back with a tactic that corporations, lobbyists and interest groups are increasingly using against academic researchers: Their trade coalition filed a public records request with the university in July seeking everything Mr. Ventry had written or said about the companies this year, including emails, text messages, voice mail messages and hand-jotted notes.
Theuniversity estimated that it spent 80 to 100 hours complying with the request, filed under the California Public Records Act, which requires employees of any state agency or institution to produce, upon request from any member of the public, any record that relates to “the conduct of the public’s business” that is “prepared, owned, used or retained” by the university.
The request generated 1,189 pages of documents, university officials said. And it was just one example of how both state-level public records laws and the federal Freedom of Information Act, written to ensure transparency and accountability in government, have morphed into potent weapons in legal and business disputes, raising questions about the chilling effects — and costs — they impose on targets who are doing research in controversial or sensitive fields.
A 2017 analysis of requests filed under the Freedom of Information Act found that “public-oriented inquiries by concerned citizens and their advocates” account for “only a small fraction of the 700,000-plus FOIA requests submitted each year,” wrote David Pozen, a law professor at Columbia University, whose paper reviewed studies on the issue. “The bulk of requests come from businesses seeking to further their own commercial interests by learning about competitors, litigation opponents or the regulatory environment.”
Public records requests have long been an important tool for a wide variety of groups, like journalists, political opposition researchers, climate-science skeptics, animal rights advocates and anti-abortion activists keen to dig into research and the work of people in the government.
But the sheer scale of the requests in recent years, and their growing use by advocacy groups and business interests to challenge academic work at public universities, has alarmed some experts, who say the commitment to openness embodied by freedom of information laws could be tested.
The weaponization of such requests poses “a real danger that we’ll hit a tipping point, where the cost and burden of open records laws will overcome the benefits and we’ll have a retrenchment of transparency rights,” said Margaret Kwoka, a University of Denver professor with expertise in government transparency litigation. “This kind of abuse fuels the political will to do that.”
The University of California system, with nearly 45,000 faculty and academic appointees on its campuses and in its laboratories and medical centers, sits at the center of this trend.
In 2009, the system received a total of 3,266 public records requests. In 2017, it received 16,921, an increase of 418 percent.
A significant portion of the requests are from activists and industry groups “using public records requests as one part of a strategy to undermine the work of researchers in controversial fields,” Maria Shanle, managing counsel for education affairs and governance at the University of California, said in an interview.
These have included a 2011 request for every document a visiting scholar produced related to “chemical substances, includingflame retardants”; a 2012 demand by an anti-abortiongroup for the names of researchers working on an abortion safety study; and a 2015 request for every email to and from a journalism professor that contained words like “biotech” and “Monsanto.”
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“What we need is a dividing line between financial and ministerial accountability, and the university’s function as an intellectual and teaching institution,” Claudia Polsky, an assistant law professor who directs the Environmental Law Clinic at the University of California in Berkeley, said in an interview.
In a paper titled “Open Records, Shuttered Labs: Ending Political Harassment of Public University Researchers,” Ms. Polsky argued for legislative protections, already offered in some states, for unpublished emails and other personal records that can be used to stymie research.
“Digging into professors’ email inboxes has nothing to do with democratic accountability or fiscal transparency,” she said, “and everything to do with creating ideologically based mischief.”
In Mr. Ventry’s case, he said he did not have anything to hide — he has been a critic of the tax preparation program, Free File, and an outspoken advocate for no-cost, simplified, government-provided tax preparation for years. But he said that the request had made collaborators in his research wary of communicating with him and amounted to intimidation by the industry.
“They are trying to bully me,” Mr. Ventry said of the industry group. “More importantly, they are trying to chill my research and scholarship, whether it has to do with tax law reform or not.”
The industry group, the Free File Alliance, whose legal name is Free File Inc., defended the request as a proper use of public records law.
Mr. Ventry, the group said, had a conflict of interest because he also serves as the chairman of an outside advisory group to the I.R.S. and was intent on promoting an alternative plan under which the government would offer its own tax preparation service through the I.R.S. The alliance defends its program as benefiting low- and middle-income Americans who would otherwise have to pay for tax preparation services.
Freedom of information requests “are a legitimate, legal method to determine what public officials are doing and saying in their official capacity,” the alliance said in an emailed statement. “Professor Ventry holds a strong preconceived bias against the I.R.S. Free File program.”
Mr. Ventry is not employed by the I.R.S. He is the chairman of the Internal Revenue Service Advisory Council, a public forum on tax administration issues that advises the I.R.S. commissioner and is composed of outside experts who volunteer their time. He was a published critic of Free File for years before joining the council.
Mr. Ventry; Joseph Bankman, a tax law professor at Stanford University; and others have worked over the years to create a model for free tax-filing programs administered by a half-dozen states, while advocating a free, streamlined federal e-filing system.
In July, Mr. Ventry, Mr. Bankman and other colleagues wrote op-eds taking aim at Free File, which the I.R.S. offers to many taxpayers through an agreement with the Free File Alliance, which includes Intuit, makers of TurboTax and other software; H&R Block; and 10 additional commercial tax preparation companies.
After the House passed a bill that included a provision making the Free File agreement permanent, the academics raised alarms. Citing research, I.R.S. statistics and investigations by ProPublica, The Wall Street Journal and others, Mr. Ventry wrote that Free File is a “failed program” that “inflicts substantial harm on taxpayers” by confusing them, pushing them toward paid products and failing to fully protect their personal data.
The companies in the Free File program are not compensated by the I.R.S. for providing their services. But ending the program and replacing it with a government-run electronic filing service for all taxpayers would threaten the industry.
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In a July opinion piece in The Hill titled “Free File Providers Scam Taxpayers; Congress Shouldn’t Be Fooled,” Mr. Ventry originally included his affiliation as chairman of the tax agency’s advisory council as well as his academic post. (After a complaint from the industry group, he removed the affiliation to the council.)
In a subsequent commentary, the academics criticized the I.R.S. for poor oversight of the industry agreement, saying that Free File “puts tax preparation companies first and taxpayers last.” Some of the criticism echoed the I.R.S.’s independent taxpayer advocate, Nina E. Olson, who said in an interview that Free File was a “poorly designed” program that only 3 percent of eligible taxpayers used after 15 years in existence.
Days later, the University of California received the request for all of Mr. Ventry’s communications about the op-eds, including his contacts with the I.R.S. taxpayer advocate’s office.
In addition to its public records requests, the alliance wrote directly to the I.R.S. about Mr. Ventry in July, saying he “improperly used his I.R.S. affiliation to lend credibility to this attack.” The alliance questioned whether Mr. Ventry should be able to speak out publicly on the issue given his role on the I.R.S. advisory council.
Mr. Ventry said that role was strictly advisory and that he received no compensation aside from his university salary. After the industry alliance leveled the complaint, he says he voluntarily recused himself from the council’s analysis of the Free File program, due out in November.
Responding to the academics’ criticism in a letter to the editor published in the policy journal Tax Notes, Tim Hugo, a Republican member of the Virginia House of Delegates who serves as the alliance’s executive director, wrote that the partnership between the I.R.S. and Free File had saved taxpayers “an estimated $1.6 billion in tax preparation and filing fees” since its inception in 2003.
The program was under attack, he wrote, “by a handful of ideologues” who “want a centralized system of direct government tax preparation.”
Representatives for Intuit and H&R Block said the companies did not participate in the records requests by the industry group, but the alliance confirmed that the member companies received the documents produced by the university.
Stanford is a private institution not subject to public records requests under the California law, but the alliance’s lawyers used the University of California request to obtain Mr. Ventry’s communications with Mr. Bankman, too.
“There’s nothing really that interesting in my emails,” Mr. Bankman said in an interview. But worries about such requests, he said, stifle the peer review process, a freewheeling exchange of views, often by email, in which academics around the world evaluate one another’s work.
Companies often request such emails “to intimidate people like us, because it really raises the ante and makes it very scary just to email stuff,” he added. For the industry, “it’s a freebie,” he said. “But imagine you’re some young professor somewhere — you don’t know what hit you.”
Mr. Ventry said he was more worried that Mr. Bankman and other colleagues would shy away from collaborating with him.
“We went from emailing multiple times a day over the course of a couple months to not emailing at all,” he said. The request “stifled not just academic freedom but the deliberative and beneficial process of thinking through problems with others.”
If that constitutes winning for the tax industry, he said, “they won.”
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5/19
https://www.alternet.org/2019/05/senior-irs-leaders-launch-review-of-agencys-partnership-with-turbotax-and-hr-block-amid-claims-they-deliberately-steer-users-away-from-using-free-filing-software/
Senior IRS leaders launch review of agency’s partnership with TurboTax and H&R Block amid claims they deliberately steer users away from using free filing
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https://www.alternet.org/2019/04/alexandria-ocasio-cortez-calls-out-how-congress-lets-americans-get-ripped-off-when-they-file-their-taxes/
Tax returns are due to the IRS on April 15th this year. And as Rep. Alexandria Ocasio-Cortez (D-NY) pointed out on Tuesday, when taxpayers across the country pay their due, they’ll be victims of a fundamental injustice in the American tax system.
That’s because the IRS could actually do most Americans’ taxes for them — eliminating wasted expenditure of time and, for many people, on professional tax preparers and services.
Ocasio-Cortex noted in a speech on the House floor that she wanted to lodge some of her “concerns” about the issue, as discussed by Vox’s Dylan Matthews. She quoted from his recent article, though she left out the names of the specific companies:
It is a huge scandal that Congress has not yet instructed the IRS to automatically prepare taxes for the vast majority of Americans. The IRS has all the information required to do that for all but a few taxpayers, and the main reason it hasn’t to date islobbying by companies like TurboTax and H&R Block.
“The reason it doesn’t may have to do with the role of money in politics,” she said. “I would like to commend the advancements we have made for working class people, but long-term, we should be looking at a solution where everyday people do not necessarily have to spend hours every year preparing tax returns when the majority of Americans have relatively simple and straightforward returns.”
Matthews noted that there’s a bipartisan bill that would prevent the IRS from making tax-filing software and interfaces that could compete with services like TurboTax. It is, essentially, a massive giveaway to these companies, he argued. And it would be a blatant way for the American people to get ripped off by their own legislature.
“Banning the IRS from offering an equivalent product to those companies for free would hurt consumers, provide no social value, and purely serve to increase ill-gotten rents for two of the most pointless companies currently involved in American capitalism,” Matthews wrote. “There is no excuse for Congress passing this provision.”
Watch the clip below:
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https://www.propublica.org/article/congress-is-about-to-ban-the-government-from-offering-free-online-tax-filing-thank-turbotax
GUTTING THE IRS
Congress Is About to Ban the Government From Offering Free Online Tax Filing. Thank TurboTax.
A bill supported by Democrats and Republicans would make permanent a program that bars the IRS from ever developing its own online tax filing service.
ust in time for Tax Day, the for-profit tax preparation industry is about to realize one of its long-sought goals. Congressional Democrats and Republicans are moving to permanently bar the IRS from creating a free electronic tax filing system.
Last week, the House Ways and Means Committee, led by Rep. Richard Neal, D-Mass., passed the Taxpayer First Act, a wide-ranging bill making several administrative changes to the IRS that is sponsored by Reps. John Lewis, D-Ga., and Mike Kelly, R-Pa.
In one of its provisions, the bill makes it illegal for the IRS to create its own online system of tax filing. Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system. If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry’s profits.
“This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program,” said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center.
The Free File Alliance, a private industry group, says 70% of American taxpayers are eligible to file for free. Those taxpayers, who must make less than $66,000, have accessto free tax software provided by the companies. But just 3% of eligible U.S. taxpayers actually use the free program each year. Critics of the program say that companies use it as a cross-marketing tool to upsell paid products, that they have deliberately underpromoted the free option and that it leaves consumer data open to privacy breaches.
The congressional move would codify the status quo. Under an existing memorandum of understanding with the industry group, the IRS pledges not to create its own online filing system and, in exchange, the companies offer their free filing services to those below the income threshold.
Experts have long argued that the IRS has failed to make filing taxes as easy and cheap as it could be. In addition to a free system of online tax preparation and filing, the agency could provide people with pre-filled tax forms containing the salary data the agency already has, as ProPublica first reported on in 2013.
One member of the Free File Alliance explicitly told shareholders that the IRS “developing software or other systems to facilitate tax return preparation … may present a continued competitive threat to our business for the foreseeable future.”
The IRS’ deal with the Free File Alliance is regularly renegotiated and there have been repeated, bipartisan efforts in Congress to put the deal into law.
Those efforts have been fueled by hefty lobbying spending and campaign contributions by the industry. Intuit and H&R Block last year poured a combined $6.6 million into lobbying related to the IRS filing deal and other issues.Neal, who became Ways and Means chair this year after Democrats took control of the House, received $16,000 in contributions from Intuit and H&R Block in the last two election cycles.
Neal, who describes himself as a longtime champion of the existing Free File program, has argued that it would “would help low- and moderate-income taxpayers.”
Free File Alliance Executive Director Tim Hugo called it “a great idea when you can provide a great product — free tax returns — to Americans at no cost to the federal government.” An H&R Block spokesperson said the company believes “Free File should be the subject of ongoing improvement, and we are committed to working with all parties to strengthen and improve Free File on behalf of the American taxpayer.”
Spokespeople for Neal, Lewis and Kelly did not immediately respond to requests for comment about the provision. A companion Senate bill with the same provision has been introduced by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Ore.
While efforts to make the IRS’ deal with the tax preparation industry permanent have fizzled in the past, critics are particularly worried this year. The Taxpayer First Act also includes a provision that would restrict the IRS’ use of private debt collectors to those above a certain income. A Wyden spokesperson said the current bill is a “bipartisan, bicameral compromise so it includes priorities of both chairmen and ranking members.” Wyden “supports giving the IRS the resources it needs to offer more services to taxpayers,” the spokesperson added
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