Over recent weeks, nonprofit news publication ProPublica has released a set of stories accusing Intuit of obfuscating its Free File product, and directing DIY taxpayers instead to its Free Edition, where they are then directed through a set of complex search algorithms to a paid option, even if they qualify to file for free.
Intuit and other tax software companies have a deal with Capitol Hill to provide a “Free File” product in exchange for the Internal Revenue Service not offering its own tax preparation and filing service, which would also be free. The argument is that if the IRS were to offer a free tax preparation service for non-complex tax returns (as many other tax agencies around the world already do) this would take away revenue from the tax prep software companies. In the interest of keeping their customer base as robust as it always has been, Intuit and other companies have spent millions ensuring this doesn’t come to pass.
If the goal of road-blocking the IRS from providing this service is to preserve its customer base — and, it goes without saying, its revenue — it would make sense, then that Intuit would try its best to not promote its free option, for which taxpayers making under $66,000 a year would qualify. ProPublica uncovered a damning trail that suggests this is exactly what Intuit was doing, but Intuit is vehemently denying this.
This week, ProPublica gained access to an internal company video of Intuit CEO Sasan Goodarzi defending the company’s actions — in fact, denying them — to its employees.
“We are and will always be a values-driven company,” Goodarzi said in the video. “Chief among those is integrity without compromise.”
He goes on to state the familiar lobbyist’s argument: That it is a conflict of interest to have the government tax agency also in charge of preparing taxpayers’ tax returns.
“They claim it is better to have the tax collector centralize all aspects of the taxation process from collecting accurate data about tax payers, to filling out the original return, to determining whether a person deserves a return, to auditing the return to enforcing compliance,” Goodarzi says.
This rationale may make sense to a layperson, but in fact, the logic is a sleight of hand. The IRS is not a private company beholden to shareholders. It is a nonprofit governmental agency, subject to a set of laws and regulations that would prevent the IRS from misleading taxpayers or whatever else a private company may be accused of doing.
At least 36 other countries in the world have either return-free filing, or a system where the central tax agency prepares tax filings for taxpayers, with success.
In April Senator Elizabeth Warren, D-Mass., along with several other Democratic senators re-introduced legislation to simplify and decrease the cost of filing taxes. She led this charge in 2016, and re-introduced the legislation again in 2017.
“Taxpayers waste too many hours and hundreds of dollars on tax preparation each year, which disproportionately burdens low-income and minority taxpayers,” Senator Warren stated. “This bill will require the IRS to offer easy, free, online tax-filing for all taxpayers. This is a simple idea with a long history of support from both Republicans and Democrats, and it’s time to make it a reality.”
Over the years, a version of tax simplification has been endorsed by tax scholars and a bipartisan set of policymakers. The bill is endorsed by the National Consumer Law Center (on behalf of its low-income clients), the Institute for Taxation and Economic Policy, Americans for Tax Fairness, Economic Security Project Action, the Hispanic Federation, Americans for Financial Reform, and Public Citizen.
“Millions of Americans each year who are eligible for cash refunds like the Earned Income Tax Credit don’t claim them — either because tax filing is too complicated, or they don’t know they’re eligible,” said Adam Ruben, director of Economic Security Project Action, in a statement. “This creates a system where only the wealthiest Americans can afford to take advantage of the tax breaks and deductions available to them. Senator Warren’s Tax Filing Simplification Act is a commonsense improvement that would make tax filing easier and more fair, and mean millions more hardworking Americans will get the refunds like the EITC they’re entitled to.”
The official word to media from Intuit is a statement from vice president of corporate communications Rick Heineman: “Any suggestion that Intuit does not support the IRS Free File Program is flat wrong. We are committed to offering Americans the ability to file their taxes for free, and we’re committed to the IRS Free File program. More people have filed their taxes for absolutely free with TurboTax than all other tax prep software companies combined.”
Intuit is by far the largest tax prep software provider, so it doesn’t prove much to say that more people have filed for free on TurboTax than any other tax prep software. Accounting Today is awaiting actual numbers from Intuit.
Goodarzi positions ProPublica’s investigation as politically motivated. But however much Intuit claims not to be politically motivated, it has spent a lot of money lobbying for its right to not find a competitor in the U.S. government.
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