Senator Warren slams Intuit's 'junk fees' as America's Tax Day rolls around again
- Reference: 1713207610
- News link: https://www.theregister.co.uk/2024/04/15/warren_intuit_tax/
- Source link:
The FTC has been after Intuit, the operators of TurboTax, for years now, and in January finished a two-year probe and [1]banned the tax filing system from misrepresenting itself as free. Warren applauded the move in her letter to the regulator, but said that research by her office had shown that US folks are still being misled and needlessly charged.
"Intuit continues to try to trick and trap TurboTax users into paying junk fees to file even very simple tax returns,": Warren wrote
[2]PDF
. "Filing taxes should be free and simple. But instead, Americans spend on average of nine hours, and $150, to file their taxes, thanks to junk fees charged by Intuit and others."[3]
This isn't the first time Intuit has been in the cross-hairs. In 2022 it [4]agreed to pay out $141 million to settle a case brought by all 50 states claiming the tax filing software was misleading people about its so-called "free" filing services.
[5]
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Warren said her staffers presented Intuit's software with a test case - filing as a single mother returning to work as a teaching aide. To file a return using TurboTax would have cost her $133, Warren asserts, when the same filing could have been done for free using the IRS' Direct File system.
"This sample taxpayer provides a concrete example of how TurboTax still appears to be ripping off taxpayers," she states. "Given Intuit’s ongoing anti-taxpayer practices, it is outrageous that the company continues to fight the FTC lawsuit and lobby against the IRS Direct File program."
[7]Intuit ordered to use the word 'free' less freely in its ads
[8]FTC sues Intuit for false advertising, says 'free' TurboTax isn't always free
[9]FTC presses ahead in its war on 'free' Turbo Tax
[10]TurboTax to pay $141m to settle claims it scammed millions of people
This year the Direct File system is being trialed in 13 states and has companies like Intuit worried. Under that scheme, the IRS works out tax returns automatically and for free, in line with tax systems in much of the developed world, and people can choose whether or not to accept the tax authority's quote or file their own return.
The inefficient complexity of the US tax system is a surprise to many immigrants to America's shores, and a major money spinner for Intuit and others. Intuit had no comment on the letter at time of publication. ®
[11]
PS: We've heard some good things about [12]freetaxusa.com that does free federal filing and charges 15 bucks per state. It also charges for add-on features. This isn't an ad, and it may or may not be for you. Just sayin'.
Get our [13]Tech Resources
[1] https://www.theregister.com/2024/01/24/intuit_ordered_to_use_free/
[2] https://regmedia.co.uk/2024/04/15/warren1.pdf
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Zh2jeSDzx9FxbJkKV2Dh8gAAAEY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://www.theregister.com/2022/05/04/intuit_turbotax_settlement/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zh2jeSDzx9FxbJkKV2Dh8gAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zh2jeSDzx9FxbJkKV2Dh8gAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2024/01/24/intuit_ordered_to_use_free/
[8] https://www.theregister.com/2022/03/29/ftc_tax_intuit/
[9] https://www.theregister.com/2022/08/23/intuit_ftc_advertising/
[10] https://www.theregister.com/2022/05/04/intuit_turbotax_settlement/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zh2jeSDzx9FxbJkKV2Dh8gAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://freetaxusa.com
[13] https://whitepapers.theregister.com/
Re: A solution?
No, businesses will just have their lawyers find the best way to slither around any such rule.
The solution is to have IRS.gov provide a free service to fill out your taxes, getting all the tax prep services out of it entirely. They've got all your tax info, they could easily pre-fill a tax return for you, and just let you scrutinize it and either submit as-is, or go through and make any changes / itemizations you want/need.
The only reason the IRS didn't start providing this service a couple decades ago is the for-profit tax services lobbied against it, and they all agreed to provide free filing options for cheaper/simplel tax returns, in exchange for the IRS scuttling the plan. Since they've demonstrated their bad faith, it's back to plan A.
They are starting to do this now. "Direct File" is available this year for "12 pilot states". Hopefully this will be expanded to the rest by next year.
Some IRA free file partners are honest. https://www.olt.com/ will allow you to file Federal taxes up to any income level for free. They prompt you to spend a few dollars for greater features, but you can opt out. However, state taxes aren't free, about $10 if you file through them. Some states don't have income taxes, and others have their own websites to allow free filing, but paying OLT $10 to pre-fill your state return may be the most convenient.
The government creates the rules, we just play by them
Intuit is a predatory company, and I am not going to defend them per se. But EVERY tax return can be filed for free if you want to fill out and file the forms yourself, and $133 is much less than what a CPA would charge if they prepared the return. Someone has to pay for the knowledge and training that a tax preparer has if they want to use that preparer to file their taxes, and Warren complaining that companies charge for the service is a non-starter.
Charging after the fact while claiming to be free is a different issue, and some C-level execs seeing the inside of a prison cell for fraud is a reasonable expectation.
However the government created the US tax code, so it is the responsibility of the government to fix it so that there is no need for private enterprise to step in and fill the void. It is legislators like Elizabeth Warren who are the ones responsible for overseeing that. Intuit can charge because Warren and her ilk haven't done THEIR job, and then are blaming free enterprise for filling the void that they left. If legislators would do their job instead of passing the blame this would be a non-issue.
Re: The government creates the rules, we just play by them
Something like 90% of people have trivial taxes and do not need any assistance whatsoever to file. They've got one or two salaried or hourly jobs, and that's it.
In most of the world they wouldn't file a tax return at all!
- In the UK for example, if you have one or two jobs HMRC work it all out each year and tell your employer how much tax to take out of your salary. At the end of the tax year they adjust so small discrepancies even out.
In the UK around 75% of workers do not fill out a tax return at all. Maybe 10% pay a tax accountant to prepare their return, generally because that accountant pays for themselves by knowing legal ways to reduce tax due.
The trouble in the US is that some companies are charging quite a lot of money for utterly trivial work.
Considering most Americans can't point out another country on a map, asking them to file their own taxes would be a disaster.
https://youtu.be/umpalMtQE50?si=oLJ_XNdoK63KU9yN
How are people spending "on average of nine hours, and $150" to file their taxes? Desktop Turbotax and H&R Taxcut retail for less than $40 and will cover most situations. Is this a problem where the average and the median values differ greatly and this average includes rich people paying CPAs a thousand or two? Or are people somehow actually paying Intuit $150?
I do my taxes (federal plus two states) and file them using the H&R Block tax software (desktop, windows), the software was about $36, includes federal and one state, federal is free efiling, New York is free efiling. Purchasing the second state and efiling that one is not free. Even so, it is under $100 for my situation.
Even if filing out the paper forms and mailing them in, like I used to do, I would pay for the certified mail with receipt option, which was not cheap across 3 big envelopes. Ah, the good ol' days when the post office was open to midnight on the 15th and the lines were long.....
That said, the IRS could, for many taxpayers, calculate their tax return based on the W-2 and 1099 information it gets and the tax code is needlessly complex, partially at the behest of special interests such as various financial companies such as Intuit.
are people somehow actually paying Intuit $150?
If you file your taxes in person at H&R Block, I don't think you can get out the door without paying at least $150.
https://www.hrblock.com/tax-offices/upfront-pricing/
https://www.mightytaxes.com/hr-block-pricing/
I expect most people don't enjoy or don't trust themselves to "enter the number from line 14a. on line 27 if it is greater than than the number on line 8" for a couple hours of their life, and instead prefer to let someone else trudge through it.
Actually the usual version of TurboTax I have to buy (because I sold stock from my ESPP) is now $65.
I spent 30 minutes trying to buy & download TurboTax, to save myself a trip to physically buy it.
It was a maze of twisty little links, all alike, and I wasn't able to do it. It was the CLOUD CLOUD CLOUD CLOUD! that we're all familiar with here.
This was back in February, and I notice they now have a footer with a "Desktop Products" section that wasn't there before.
One irritating factoid is that there is one Treasury filing system that works by providing PDFs and uploading them (FinCEN), yet you can't do the same thing with the IRS forms. Eliminating the stupid "print, stuff in envelope, take to mailbox" faff would be welcome.
A solution?
Maybe a solution to this problem is to legally force any paid-for tool to display a prominent banner informing the user that what they are about to pay for can be done for free, and provide the necessary links or addresses or phone numbers to the free service.
And be very explicit about how big the banner must be and in what colours. And specify that it is displayed before the user has gone to the trouble of typing in any information. And to make sure the user has not missed anything, force the user to click either the “use free service” or the “I understand this is available for free but I want to spend money on it anyway” button