TurboTax hid entirely free online tax filing service from search engines, report alleges
LOS ANGELES - If you've used online software to file your tax returns, you might not have realized that companies that sell online tax filing services are required to offer lower-income Americans an entirely free option.
ProPublica reported last month during tax season that TurboTax had "tricked" some people into paying to file taxes through a tactfully worded program called "TurboTax Free Edition." It contained the word "free," but it also put many customers who were likely eligible for the truly free option on track to eventually pay, the report said.
According to the report by ProPublica, TurboTax made it difficult to locate the completely free tax filing option, "TurboTax Free File," for those who make less than $34,000 a year. Now, many customers who used the "TurboTax Free Edition" are requesting refunds, the report said.
According to the TurboTax website, the "TurboTax Free Edition" could "be used by higher-income filers but only handles simple returns with no additional schedules," adding that upgrades and add-ons would be available. Customers could be charged if they had multiple sources of income or deductions for self-employed expenses, according to ProPublica's screenshot of the company's website. Many lower-income filers have reportedly ended up filing with the "TurboTax Free Edition," which is different from "TurboTax Free File," also known as the "TurboTax Freedom Edition."
Intuit and other tax software companies spent millions in lobbying dollars to ensure that the IRS doesn't offer its own free tax preparation and filing service, ProPublica reported. Instead, companies, including Intuit, have entered into an agreement with the IRS to offer a "free file" product. The "TurboTax Free File" program was created to meet that requirement.
"TurboTax Free File Program is geared towards lower-income filers, regardless of tax return complexity, and is only offered through the IRS Free File Alliance (FFA) program," the company's website says.
But Intuit hid its "TurboTax Free File" edition from search engines, ProPublica reported in April. When reporters for the publication searched for the term "IRS free file taxes," they were led to the "Turbo Tax Free Edition" instead.
After ProPublica revealed that Intuit hid its "TurboTax Free File" product from search engines, the company changed its source code, but the change was made after April 15, the deadline to file taxes, making it too late for those eligible to file for free, the outlet reported.
Intuit CEO Sasan Goodarzi responded in an 11-minute internal video that ProPublica published on Wednesday.
"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," Goodarzi said in the video.
He also addressed the company's changing of its code.
"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," Goodarzi said.
It was also revealed in ProPublica's report in April that if one were to start the process from TurboTax.com, "it's impossible to find the truly free version," which is "TurboTax Free File."
"The company itself admits this," ProPublica asserted in its report, pointing out an FAQ page on TurboTax's website.
"The TurboTax Free File program is exclusively available online and has its own dedicated website at taxfreedom.com," the company's website says. "It is not accessible from the 'regular' TurboTax.com website."
According to the TurboTax website, in order to qualify for the "TurboTax Free File" program last tax season, a person would need to meet one of the following requirements: your 2018 household adjusted gross income is $34,000 or less, you qualify for the Earned Income Tax Credit, or in 2018, you served as active duty military (including reservists and National Guard) with a maximum AGI of $66,000, and you have a military-issued W-2.
Intuit promised the IRS that it would offer a free option, as detailed in a memorandum of understanding on services and disputes, ProPublica reported. The MOU is a three-year agreement that ends on Oct. 31, 2021.
"Members shall work in concert with the IRS to increase electronic filing of tax returns, which includes extending the benefits of online federal tax preparation and electronic filing to economically disadvantaged and underserved populations at no cost to either the individual user or to the public treasury," the MOU reads.
Lower-income customers who made less than $34,000 and ultimately paid after having filed their taxes under "TurboTax Free Edition" as opposed to the truly free "TurboTax Free File" edition, are requesting refunds from TurboTax, according to ProPublica. https://www.propublica.org/article/how-to-get-turbotax-refund The outlet suggested for those who did so to use the following language when speaking to TurboTax:
"I have found an error with my billing that I would like corrected. I was billed for the wrong edition of TurboTax. I was supposed to have used the TurboTax Freedom Edition, or TurboTax IRS Free File edition. According to the IRS' official website, because I make less than $34,000 per year, I am eligible for the TurboTax Freedom Edition, which is part of the IRS Free File program. Please switch me to that edition and refund the price difference."
ProPublica said that its reporters have repeatedly asked Intuit about its refund policy, and the company has not answered their questions.
If your adjusted gross income was $66,000 or less, the IRS website lists at least eight free software options for free federal returns here. https://apps.irs.gov/app/freeFile/ Some of the companies offer free state tax returns, while some charge a fee, the website said, suggesting consumers can see detailed information on the company's websites.
For those with an income of above $66,000, the IRS also offers "Free File Fillable Forms."