Photo by Kimberly White/Getty Images for TurboTax
Earlier this year, ProPublica published a report showing how Intuit, the company behind TurboTax, was misleading users into paying to file their taxes — something that’s supposed to be free in the first place for many. They, along with H&R Block, went so far as to keep the free versions from showing up in search engine results. This made it harder for users to find the free versions online, and many people ended up paying to file their taxes when they really didn’t have to. Now, ProPublica reports that the IRS is taking steps against this.
On Monday, the IRS released an addendum to its Free File program — the agreement with tax preparation companies intended to keep tax filing free — that now prohibits these companies from hiding the pages that allow you to file for free from Google and other search engines. They’ve also eliminated a restriction against the IRS making its own filing software.
In several other countries, filing your taxes is a lot easier. The government uses data it already has on your income to fill out your taxes. But in the United States, Intuit has spent millions each year lobbying against these simpler systems which would eliminate the need for their services. Tax industry lobbying was how the IRS’s Free File was initially created, with the IRS agreeing to leave it up to those companies.
The Free File program initially said that filing software had to allow lower- and middle-income taxpayers to be able to file for free. In return, the IRS agreed to not make its own free filing software, something that the tax preparation companies thought could be a big competitor to their business. The new addendum also requires all these tax preparation companies to give their truly free options a specific badge: “IRS Free File program delivered by [Member company name or product name],” so you can tell them apart from other versions which might sneakily require you to pay.
When ProPublica published their groundbreaking report in April, they found that TurboTax’s main page didn’t even link to the page that lets you file for free. You couldn’t access the free version from TurboTax.com at all. Some of the links in the free version of TurboTax would link to the paid version, tricking you into paying more than you should. And TurboTax had also deliberately targeted students and low-income users with the paid version of their service, moving necessary forms like student loan interest deduction into the “Deluxe” tier. But the IRS isn’t addressing those sorts of tricks with its new restrictions, so it’s quite possible Intuit and other tax prep companies will have plenty of other ways to make their money.
In the meanwhile, Intuit is currently facing investigations over its practices leading people to pay for what is legally a free service.