Audit Indicates Intuit Made $1 Billion By Hiding Free File Program From The Public

from the dr-evil-shit dept

It's been quite a long and frustrating walk for us in covering the lengths to which Intuit went to hide the free to file tax program. This is the program that it is legally mandated to offer. If you're not caught up, the IRS struck a deal with the big tax prep companies out there, promising not to offer and expand its own free file programs, but only if companies like Intuit offer their own free file programs. Intuit did as instructed with its TurboTax product, except that the company then went about hiding the website for the free to file program from search engines and the internet, all while dropping the word "free" into as many places on the website for the paid services site it also runs. Then, because evil is an addictive drug, Intuit went ahead and lied to a bunch of customers to avoid refunding their money when it got caught in all this, informed its own employees that it bilked the public for their own good, and was even eventually found to have wrapped itself in the American flag while swindling active duty soldiers as well.

So, now you're caught up. But perhaps you're wondering why Intuit would risk all of the bad PR that comes with treating tax prep services like a game of three card monty. Well, the answer, according to a recent audit by the Treasury Inspector General, is because one-billion dollars.

More than 14 million taxpayers paid for tax prep software last year that they could have gotten for free, according to a scathing audit released Wednesday by the Treasury Inspector General for Tax Administration. That amounts to roughly a billion dollars in revenue for TurboTax maker Intuit, H&R Block and other tax software companies, according to a ProPublica analysis of tax prep fees.

The audit, which was launched following ProPublica’s reporting last year, explores why so few taxpayers use the Free File program, a public-private partnership between the IRS and companies such as Intuit and H&R Block. Among the reasons, the audit found: the confusing design and complexity of the program and persistently lax oversight by the IRS.

I suppose if Intuit was asked precisely how much its soul was worth, we now have our answer. And, yet, this is still all very stupid in the end. Because now, thanks to ProPublica's reporting, the IRS has scrapped its moratorium on offering its own free to file program. So, by being so immensely greedy, Intuit turned what could have perhaps been a minor revenue generator instead into a combination of a PR shit sandwich and a competitor in the IRS. Well done?

But, in case you thought Intuit would finally be in a place where it recognizes its misdeeds and is ready to turn this PR boat around, nooooooope.

In a statement, an Intuit spokesman said the company “consistently and publicly supported recommendations and efforts to strengthen the [Free File] program as part of our commitment to free tax preparation and our mission to empower individual taxpayers to manage their finances and receive every dollar they earned and deserve.” He added that “the majority of eligible tax filers using DIY software filed for absolutely free through the Free File Program or using commercial products.”

Around 104 million taxpayers were eligible for Free File last year, according to the audit. Of those, just 2.4% actually used the free government program. Of the remaining 101.5 million, 67 million did not use tax software (most going to bricks-and-mortar tax prep services). The remaining 34.5 million used software to do their taxes, and of those, 14 million paid for tax prep they could have received for free.

So Intuit would rather play games in representing its numbers than simply admit to the truth. Not exactly the sort of thing you might want out of a tax prep service.

Filed Under: free file, irs, scams, taxes, treasury department, turbotax
Companies: intuit

Getting Worse Part 3: TurboTax Wrapped Its Veterans Site In The American Flag And Then Tricked Soldiers Into Paying

from the usa!--usa!--usa! dept

One of the most irritating aspects of our politically polarized reality is how that polarization seeps into everything. An example of that can be seen in the ongoing coverage, here and otherwise, of the complete shitshow Intuit has found itself in over how it has handled its TurboTax free-to-file taxes system. With all the best reporting coming from ProPublica, the whole thing started by exposing Intuit purposefully hiding the free-to-file website as best it could despite its obligations to Congress, got worse when Intuit's support reps lied to customers about that reporting, and then got worse still when internal communications to Intuit staff carried the theme that Intuit was hiding its actually free program, but did so for the public's own good. The result of all of this is that many people who qualify to file for free instead paid Intuit tons of money to file their taxes, all because the non-free website -- which was massively branded with the word "free" -- told them they didn't qualify.

But here's where the polarization comes in. This story should have been met with outrage from across the political spectrum. Instead, probably because one side of the aisle has been pitching having the IRS do free-to-file itself, while the other side has been fear-mongering having a government agency do what it absolutely could be doing already, the outrage is about half of what it should be.

But if there is anything that gets applause across from both sides of the political aisle, it's typically support of US military veterans and active service members. Well, hey, great news: Intuit was fucking them over too!

In patriotism-drenched promotions, press releases and tweets, TurboTax promotes special deals for military service members, promising to help them file their taxes online for free or at a discount.

Yet some service members who've filed by going to the TurboTax Military landing page told ProPublica they were charged as much as $150 — even though, under a deal with the government, service members making under $66,000 are supposed to be able to file on TurboTax for free.

It takes a special kind of cynicism for a company to wrap itself in the American flag while charging our fighting men and women for tax prep services that it is obligated to provide for free. And it sure looks like Intuit is doing this purposefully, again playing all the SEO games it played to keep free tax prep services away from active service members. The post follows one family, the Zimmermans, that ended up paying $60 for tax prep that would have been free on the free-to-file site that Intuit keeps hidden. Liz Zimmerman ended up in that boat because she googled "tax preparation military free" and got the non-free site.

But when Zimmerman got to the end of the process, TurboTax charged her $60, even though the family makes under the $66,000 income threshold to file for free. “I’ve got a kid in braces and I’ve got a kid in preschool; $60 is half a week’s worth of groceries,” she said. “Who needs date night this month? At least I filed my taxes.”

In the commercial version of TurboTax that includes the “military discount,” customers are charged based on the tax forms they file. The Zimmermans used a form to claim a retirement savings credit that TurboTax required a paid upgrade to file. If they’d started from the TurboTax Free File landing page instead of the military page, they would have been able to file for free.

So now can we all agree that something must be done to punish Intuit for this? Is Intuit's line -- that it's hiding free services for the public good -- going to be accepted when we're talking about active duty members of the military? If you need this point driven home even more, get a load of the bullshit in Intuit's own marketing material.

To find TurboTax’s Free File landing page, service members typically have to go through the IRS website. TurboTax Military, by contrast, is promoted on the company’s home page and elsewhere. Starting through the Military landing page directs many users to paid products even when they are eligible to get the same service for no cost using the Free File edition.

An Intuit press release this year announced “TurboTax Offers Free Filing for Military E1- E5” — but refers users to TurboTax Military and does not mention the actual Free File option. (E1-E5 refers to military pay grades.) It was promoted on the company’s Twitter feed with a smiling picture of a woman wearing fatigues outside her suburban home. Google searches for “TurboTax military,” “TurboTax for soldiers” and “TurboTax for troops” all produce top results sending users to the TurboTax Military page.

Intuit will tell you that the TurboTax Military site does in fact allow some service members to file for free. And that's true, but the site also charges other service members for tax prep that would be totally free using Intuit's actual free-to-file site found on the IRS website. ProPublica dug further to test this with volunteer service members.

We tested TurboTax Military and TurboTax Free File using the tax information of a Virginia-based Navy sailor and his graphic designer wife with a household income of $53,000.

The filing experiences had just one major difference: TurboTax Military tried to upgrade us or convince us to pay for side products six times. We declined those extras each time. Finally, the program told us we had to pay $159.98 to finish filing.

And that “military discount”? All of $5.

In the Free File version, by contrast, we were able to file completely free.

Come on, people. It can't take a "Getting Worse Part 4" to get some real action on this beyond a couple of municipal and state investigations.

Filed Under: free file, taxes, turbotax, veterans
Companies: intuit

Getting Worse Part 2: Intuit's CEO Informs Employees That Free To File Was Hidden For The Public's Own Good

from the pro-public-uh... dept

Like we said, Intuit apparently wants to keep digging this hole for itself. After our initial coverage of ProPublica's excellent posts on how Intuit was going to crazy lengths to keep anyone from finding its free to file tax prep site, we followed up with reports of how many Intuit reps were lying to keep from giving people refunds. Those lies included claims that Intuit and TurboTax don't even run the free to file program and that it was instead operated by the IRS itself with TurboTax branding. Another lie was that ProPublica's reporting was all wrong and that the news organization was about to run a retraction. Spoiler alert: no they are not.

But it seems that the Intuit brass aren't content only to lie to the public. Intuit's CEO managed to cobble together an internal video -- which of course leaked -- so that he could lie to his own staff as well.

Sasan Goodarzi, the CEO of Intuit, says the company’s efforts to make its free tax-filing software harder to find on Google were part of the software giant’s commitment to educating taxpayers. In an 11-minute video sent to Intuit employees, Goodarzi said the company was trying to help consumers by steering them to “educational content” instead of TurboTax’s free filing website.

Responding to our reporting, which shows that Intuit, H&R Block and other for-profit tax software companies were steering low-income customers to their paid products, Goodarzi said the company’s marketing practices “had been misinterpreted to signal that we were trying to hide the product we offer in the IRS program. That is inaccurate.”

That's nonsense. Intuit's decision to combine buying Google ads and de-indexing the free to file site via robot.txt file has only one reasonable motivation: to hide the free option and push people to the paid services. It's also clear from the result of these actions, which is that 3% of taxpayers eligible to file for free did so, with 97% instead paying for services they didn't need. That's a whole lot of "educating" going on, all of which happens to result in gobs of money for Intuit.

We'll put the entire video at the bottom of the post for your enjoyment, but there are a couple of sections we should highlight in text.

“Over the past five years, tens of millions of consumers filed their taxes for free using one of our free offerings. That is more than every tax prep company combined.”

If there are any hard statistics to back this statement up, Goodarzi doesn't offer them. Neither did Intuit's PR folks when ProPublica asked for them. The end result, whatever the actual hard numbers, is that 3% of eligible taxpayers used the free to file program. That number ain't great.

We created a holistic marketing approach including widely used search techniques to differentiate between our own free products and the one we offer through the Free File program. Knowledge is power and we wanted to equip taxpayers with the information they need to make an informed choice and more easily find the product they were looking for. As you know we advertise a lot. We’ve all seen them: “free free free.” Because we advertise so much, our experience and our common sense tells us that the majority of people doing internet searches for the words “TurboTax free tax preparation” are looking for TurboTax free product. Not the one we offer through the IRS Free File program.

This takes a lot of stones. Suggesting that the average person searches the internet for "TurboTax free tax preparation" looking for not free tax prep by TurboTax takes the kind of full on blatant lying typically reserved for current American Presidents. And keep in mind that these poorly-spun lies are being told to internal Intuit employees. Why anyone would want to listen to this and continue to work there is beyond me.

And, amazingly, despite this vociferous defense of Intuit's practices, the video culminates with Goodarzi stating that the company has ceased hiding the free to file site due to all of this "fake news" reporting.

Our choice around search was intended to be in the best interest of taxpayers so they were more fully informed about their options and could choose what they felt was best for them. But given the misinterpretation of our well intended actions, we decided to remove the limitations we put in place.

I doubt, frankly, that this will be enough to keep away the current lawsuits and the many, many more that I imagine are in the midst of being drafted. This has class action lawsuit written all over it.

And the more Intuit continues digging this hole, the worse it will get.

Filed Under: free file, free tax filings, sasan goodarzi, taxes, turbotax
Companies: intuit

Getting Worse Part 1: Intuit Routinely Lies To Customers To Avoid Paying Refunds For Tax Prep Work

from the free-as-in-free dept

It appears Intuit has decided to make things worse rather than better. Just after tax season, we discussed ProPublica's excellent research article on the extreme lengths Intuit had gone to keep its Free File service an unknown to the public. This service is the result of an agreement the top tax prep companies out there reached with the IRS. Essentially, by promising to allow members of the public that earn under a certain amount of money to use their services to file their taxes for free, the IRS in turn has agreed not to pursue its own free to file service. It's an extremely dumb deal for any number of reasons, one of which being how much more efficient it would be for the IRS to carry the weight here, given that it already has all the information most taxpayers need to file.

The other reason, as it turns out, is because Intuit has decided to behave pretty much as cynically as it possibly can. As we detailed in our previous post, the company engaged in a strategy coupling the buying of ads for Google searches and hiding the free to file via the robot.txt file. As a result, something like 3% of eligible taxpayers file for free using the system, while Intuit set up a layer of websites and landing pages all designed to direct the public to paid services, without ever telling them they qualified for free to file tax prep.

As a result of the ProPublica post, many who paid for these services called up Intuit and asked for refunds. If you thought that this public light on shady behavior would lead to an attitude adjustment for Intuit, you're sadly mistaken.

We’ve heard from 16 people who say they were denied refunds and told that the truly free version — Free File — is a government product that’s not run by TurboTax. Ten others reported being told that ProPublica’s stories were inaccurate, or that our coverage is “fake news” or “fictitious.”

None of that is true.

It's quite hard to see how this isn't fraud. Having Intuit reps tell consumers that the free to file program is run by the IRS and not Intuit is a lie. Saying the program is "owned" by the IRS is another lie. Saying that the news organization that is currently airing all of this dirty laundry was so mistaken that a retraction was about to be run is a lie.

Laurie from Washington said she was told by a TurboTax agent that ProPublica was going to run a retraction. (Our stories are accurate, so there’s nothing to retract.) Laurie was charged $130 by TurboTax. Her adjusted gross income was just $376.

An Intuit spokesperson previously said that no material provided to call agents included “derogatory terms about ProPublica.”

Which may be technically true. However, it strains credulity for anyone to suggest that all of these stories are not the result of some centralized communication customer service reps have been instructed to use. It's far more likely that these are talking points given to reps as a way to try to stave off a wave of refunds for services that ought never have been rendered. That becomes all the more likely having seen some of Intuit's internal communications about this whole story (more on that in a separate post).

If true, that would be extremely stupid, considering that Intuit is already in legal hot water over all of this.

In a separate development on Monday, the Los Angeles city attorney sued Intuit and H&R Block under California’s unfair competition law. The two suits, which cite ProPublica’s reporting, demand that the companies pay penalties and restitution for deceiving customers.

“Low-income people without someone to stand up for them have not been able to take advantage of what should be a free service,” City Attorney Mike Feuer said in an interview. “That’s wrong.”

It appears to be an open question just how deep a hole Intuit wants to dig for itself. As we'll see in the separate post, it appears those in charge still have shovels in their hands.

Filed Under: customer service, free file, free tax filings, lies, turbotax
Companies: intuit, propublica

TurboTax Did Everything It Could To Hide The Free-Filing Its Supposed To Offer

from the hide-and-seek dept

For years, advocates for the non-wealthy public have put forward plans to simplify the tax-preparation process by having the IRS pre-prepare a tax filing with the information it already has, sending it to citizens, and allowing those citizens to either sign and return it or do their own tax preparation if they think there are errors. Several politicians have put versions of this plan forward, including Elizabeth Warren. The idea is that, for the vast majority of Americans, the IRS already has all the information it needs for the tax filing. Why make most people do tax prep when they don't have to?

Well, for just as many years, the companies that make money by doing this tax prep work have lobbied heavily in Congress to keep this from becoming law. Intuit, makers of TurboTax software, has been particularly active on this front, with novel arguments that amount to, "But if you make this law, then we'll make less money." When that messaging became a PR disaster, the company tricked a bunch of mouth-pieces to say all this for it.

Now, if all of that seems like shady shit, you ain't seen nothing yet. One of the ways companies like Intuit hand-wave concerns that its lobbying efforts are coercing the poor and middle class to pay for tax prep that is so simple it should be free is by pointing out that it entered into an agreement with the IRS to offer their own free-to-file programs for anyone that makes less than $66k in a given year. While that's true, ProPublica has a nice write up of just how far Intuit in particular goes to hide this program from the very public it's supposed to be serving.

Intuit and other tax software companies have spent millions lobbying to make sure that the IRS doesn’t offer its own tax preparation and filing service. In exchange, the companies have entered into an agreement with the IRS to offer a “Free File” product to most Americans — but good luck finding it.

Here’s what happened when we went looking.

Our first stop was Google. We searched for “irs free file taxes.” And we thought we found what we were looking for: Ads from TurboTax and others directing us to free products.

Spoiler alert: those products didn't end up being free. Despite ads that mentioned "free" several times over, the researchers that created a profile of a house cleaner making $29k for the year, TurboTax's site declared that free to file wasn't an option because the fictional citizen was an independent contractor. Instead, the tax prep would cost $119.99. ProPublica continued:

Then we tried with a second scenario. We went back to TurboTax.com and clicked on “FREE Guaranteed.” This time, we went through the process as a Walgreens cashier without health insurance, entering personal information and giving the company lots of sensitive data.

Again, TurboTax told us we had to pay — this time because there’s an extra form if you don’t have insurance. The charge? $59.99.

Per the article, both instances are not kosher based on the agreement with the IRS. That agreement is quite simple: if you make less than $66k in the year, you get to file for free, period. From there, the researchers dug into TurboTax's source code.

Even though we clicked on the “FREE Guaranteed” option and met all the requirements to file for free, the company had tagged us as a potential paying customer. In the source code, TurboTax had branded us as “NONFFA.” That stands for “Non Free File Alliance.” In other words, we were not on track to file for free after all. Even though TurboTax could tell we were eligible to file for free, the company never told us about the truly free version.

It turns out that if you start the process from TurboTax.com, it’s impossible to find the truly free version. The company itself admits this.

So, despite that site being laced with as many "free"s as could be mustered, you can't actually get to free filing at all. How many folks using the site to file for free do you think make it all the way to the FAQ page and realize their mistake compared with how many accept what the site tells them and pay up to file instead? Especially when "free" appears all over the sites on which you cannot file for free, but the actual free filing site is called, sigh, TurboTax Freedom?

But let's pretend most people do get to that FAQ. The researchers threw "turbotax freedom" into Google to see what popped up.

The first link was from TurboTax and said “Free File Program” right in the text. We clicked, and it brought us to this new page. While the orange “See If You Qualify” link did take us to the real Free File program, the blue “Start for Free” link brought us back to the version of TurboTax where we ended up having to pay.

Whatever this is, it clearly isn't Intuit comporting with the spirit of the agreement it signed with the IRS. All of these shady tactics are quite obviously designed to keep people from ever finding the free to file site, to trick the lower classes into paying for tax prep work when they should not be, and depressing the number of people that actually use it as much as possible.

The reward for all of that shady behavior are calls from the same Congress that receives Intuit's lobbying dollars to end the program as it's not achieving its goals. And, it seems Congress is also considering legally barring the IRS from offering any free to file program itself, because that certainly serves common people.

Congress is now moving to put the Free File program into law, including its restriction on the IRS creating its own free service. We wrote about that earlier this month and the opposition to this provision by freshman Democratic Reps. Katie Hill, Katie Porter, Alexandria Ocasio-Cortez and others. The House ultimately passed the bipartisan Taxpayer First Act, which also contains some provisions that consumer advocates support, such as restrictions on private debt collection of unpaid taxes.

Now the Senate is considering the bill. Its sponsors have argued that it doesn’t tie the IRS’ hands, but outside legal experts we’ve spoken to disagree. The text in the bill codifying the Free File program has long been sought by lobbyists for Intuit.

In addition to all of this, to make matters way, way worse, more information has come to light since the original ProPublica post and the original writing of this piece. In a follow up post, ProPublic has unearthed that Intuit specifically and actively de-indexed the free-to-file website from Google's search engine with the robot.txt file.

The code on TurboTax’s Free File site says “noindex,nofollow” — instructions for it not to show up in search results.

In contrast, the TurboTax page that puts many users on track to pay signals to Google that it should be listed in search results.

Sen. Ron Wyden, the ranking Democratic member of the Senate Finance Committee, said in a statement that he plans to raise Intuit’s misleading marketing with the IRS. “Intuit’s tactics to reduce access to the Free File program and confuse taxpayers are outrageous,” he said.

Don't expect Wyden to be the only member of Congress to get into the act. Several of the Democratic Presidential candidates are members of Congress as well, and you can bet that this is the kind of subject many of them will be all over. Elizabeth Warren in particular, as one of those pushing the IRS to do its own free to file program via legislation, should be an interesting watch here.

What the end result of all of this is unknown at the moment, but it looks very, very bad for Intuit. Again, Intuit signed an agreement with the IRS not only to offer free to file itself, but to take action to increase the use of it. Delisting the website where it can be done is about as counter to that promise as can be had.

Filed Under: congress, free tax filing, free taxes, irs, low income, search engines, tax prep, taxes, turbotax
Companies: intuit