The maker of TurboTax Intuit, the largest company in the tax preparation software industry, announced on Thursday that it will be leaving the Free File program, the public-private partnership that offers free tax returns to millions Americans, but which has been controversial since its inception. two decades ago.
The program was founded as a bet by the tax preparation industry, led by Intuit, after the George W. Bush administration proposed that the IRS create a free online filing option for taxpayers. Such an option would have threatened the profits of the booming tax preparation software business. After corporate lobbying, the IRS agreed not to develop its own filing portal. In return, the industry offered free versions of its software, including TurboTax, to most Americans.
The release of the two biggest participants of Free File – Intuit, and, last year, H&R Block – casts doubt on the future of the program. The Free File Alliance, the industry group that administers the program with the IRS, did not immediately respond to a question about the viability of the program after Intuit left, but said, “We appreciate it. [Intuit’s] service by providing millions of free returns to US taxpayers.
Intuit made its announcement in a blog post titled “Accelerating Technological Innovation to Better Help Consumers Solve Their Most Urgent Financial Problems”. The company said its decision to quit the program at the end of tax season in October would allow it to “focus on more innovation” in a way it says is not allowed in the program. . the agreement With the IRS governing the program comes a series of restrictions – some of which prohibit the advertising of higher paying products to Free File users – that have been imposed to ensure that the program is truly free.
“Intuit’s goal is to democratize financial services that are generally only available to the wealthy by providing all Americans with access to opportunities to improve their finances,” the company’s blog said. “Yet the Free File program is designed to focus solely on tax preparation and electronic filing with strict user experience requirements.”
The statement added that “Intuit remains committed to free tax filing. With more free tax returns than all other tax preparation software companies combined, Intuit is the industry leader in free tax preparation.
A spokesperson for Intuit declined to comment beyond the blog post.
A series of articles by ProPublica have shown that, for many years, Intuit and other companies have steered taxpayers eligible for free online tax preparation into paid options. Some of these tactics centered on heavily marketing options that were labeled “free” but were distinct from the Free File program and often led users to paid commercial products. In 2019, Intuit went so far as to add code on its free files website which prevented the option from appearing in results on Google and other search engines. (This code was later removed.) The company used “dark patterns,” according to the ProPublica report, which are “design tricks to get users of its website to do things they didn’t. not necessarily the intention to do ”.
An audit by the Inspector General of the Treasury for the tax administration estimated that in 2019 more than 14 million taxpayers paid for tax preparation software that they could have gotten for free. ProPublica estimated that these customers generated around $ 1 billion in revenue for Intuit and other companies.
Intuit’s announcement this week comes as litigation, triggered by reports from ProPublica alleging that the company tricked TurboTax users into paying for tax preparation they could get for free. In litigation and in responses to previous ProPublica articles, Intuit has denied misleading customers.
Dozens ofthousands of TurboTax customers are seeking arbitration, an alternative to legal action, to pursue claims that they paid for a service that should have been free. Intuit has denied any wrongdoing.
The IRS Free File program currently has nine free offers tax preparation companies, including Intuit. The other offers come from much lesser-known brands, including TaxSlayer and FileYourTaxes.com. The IRS did not respond to a request for comment.