TurboTax has lobbied against a free tax filing system for decades. Its head says the US' path toward one is 'unquestionably a conflict of interest.'
- The Inflation Reduction Act passed last summer allots funds to explore a free federal tax filing service.
- The head of TurboTax's parent company says that a government-run tax filing service would be unethical.
American taxpayers spend billions each year to file their taxes, but the country is inching closer to a free federal tax-filing system for you to use.
Sasan Goodarzi, CEO of Intuit, isn't on board with such a system, however.
"Unquestionably, a government-run tax preparation system that makes the tax collector the investigator, auditor, enforcer, and now also the preparer, is a conflict of interest," Goodarzi told Insider. Intuit, a global financial technology platform, owns TurboTax, one of the leading paid tax filing services.
Rick Heineman, vice president of corporate communications at Intuit, gave the same description to ProPublica last year in response to the Inflation Reduction Act's requirement that the IRS study free tax filing options. The IRA set aside $15 million for the Treasury Department to explore creating a free federal tax-filing website.
"Tax filing should be simple," Treasury Secretary Janet Yellen said after the IRA passed last year. "I recently came across a statistic that it takes an average American 13 hours to file a tax return. Compare that with Sweden. Some taxpayers can file simply by replying to a text message. We can and must do better."
Intuit additionally says that such a system would be a waste of government funds.
"100% of American taxpayers can file their taxes completely free of charge today at no cost to the government," the company told Insider in a statement. "Creating a government run tax preparation program would be a waste of taxpayer dollars and further disenfranchise low income taxpayers. A direct to IRS tax prep system is a multi-billion dollar solution looking for a problem."
Eight OECD countries entirely prepare returns for the majority of taxpayers. Estonia is often cited by American politicians as an ideal, as it takes about five minutes to file someone's returns there. In the US, tax filing services like TurboTax and H&R Block spend millions of dollars lobbying against free tax filing services.
And they've come under heat for that pressure in recent years.
The New York Attorney General's Office began an investigation with other authorities after ProPublica published a report alleging that TurboTax's free filing product misled millions of lower-income people into paying for services that should have been free. New York State ordered Intuit to stop advertising its services as "free," and found that Intuit "engaged in several deceptive and unfair trade practices," that deterred taxpayers from using the IRS' free filing program, according to New York Attorney General Letitia James.
Intuit paid $141 million in restitution to 4.4 million taxpayers after that investigation.
Intuit said that it already follows most of the advertising practices required by the settlement with New York and in a statement said that it "expects minimal impact to its business from implementing the remaining changes going forward."
And last year, the US Federal Trade Commission sued TurboTax, demanding that courts keep Intuit from advertising its tax services as "free." Intuit has said that it follows IRS rules and has called the complaint "simply not credible."
"Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep," Kerry McLean, executive vice president and general counsel of Intuit, said in a statement.
Almost 100 million Americans have filed their taxes for free with TurboTax in the last eight years, McLean said.
Goodarzi says that "creating a new system would cost billions of taxpayer dollars and jeopardize the financial freedom of millions more."
Free options for filing taxes already exist for most people, including those with more than $73,000 in adjusted gross income. For those making less than $73,000 annually, the IRS offers free guided tax preparation. Commercial providers such as TurboTax and Tax Act offer their own free services for those earning under a certain amount.
And the company maintained such in response to the FTC complaint.
"Intuit has always supported consumers filing for free as a founding member of the IRS Free File program and in our other practices," Intuit said in a statement. "The FTC's complaint fails to acknowledge the reality that Intuit was, at all times, in compliance with the IRS requirements."
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