Intuit will withdraw from IRS Free File program

Intuit, maker of TurboTax, will cease participating in the IRS Free File program (CNBC article). People will still be able to file free using TurboTax, since there is a free version of TurboTax outside the IRS's Free File program. CNBC says, "In the last tax season, Intuit delivered 17 million free tax filings, including roughly 3 million through IRS Free File, according to the company." So 14 million returns, about 82% of the 17 million, were filed using TurboTax's free version outside the IRS's Free File program anyway. The 82% is instead 90% for the latest eight tax seasons. 

Neither the CNBC article nor Intuit's blog mention ProPublica's smear campaign conducted between about April 2019 and February 2020. Regardless, I bet the smearing had something to do with Intuit's decision. I wrote several blog posts about the smearing. At least it gave Intuit a lot of bad publicity and spurred a government investigation (link).

The Intuit blog mentions the limitations and restraints of the IRS Free File program, but does not say what they are. Most or all of these limitations and restraints are ones imposed by the IRS. Very likely one is the IRS's no advertising mandate. Another likely one is the "dead-end street" problem within the IRS Free File program. A user can start using one of the free software offerings and later find out he or she does not qualify due to some obscure criteria. In other words, the software leads the user to a "dead-end street,"  and the user has wasted a lot of time. 

ProPublica never satisfied

The IRS and providers of free software for filing income taxes recently signed a new agreement that is hoped will increase usage of said free software on the IRS's Free File website. I wrote about it here February 9.

ProPublica is still not satisfied and continues its smear campaign against Intuit, maker of TurboTax, with this article. As usual it has plenty of deception, half-truth, and use of double standards. As usual the IRS or non-savvy people hoping to file for free bear no responsibility for what ProPublica feels is unjust. All blame goes to the software providers, especially Intuit and TurboTax.

Before saying more about the article and to clarify, there are two free versions of TurboTax. The "Free File" version is the one accessed via the IRS's Free File website, which also hosts several competitor products. The "Free Edition" version is not part of the IRS's Free File program. If somebody tries the former and discovers they fail to qualify, they will not be offered a pay version of TurboTax. They will be directed back to the IRS Free File website to start all over again with a different product. If somebody tries the latter and discovers they fail to qualify, they will be offered a pay version of TurboTax capable of handling their situation.

The following are some assertions in the article and my comments about them.

1. "Intuit does not advertise its Free File offering on Google."

Why does ProPublica feel Intuit should pay to advertise something that will produce no revenues for Intuit? The IRS gets the tax revenue, so why shouldn't the IRS pay for all advertising of the Free File program? Why does ProPublica believe Intuit should pay to advertise a website that hosts several products that compete with TurboTax? Furnishing the software costs Intuit time and money, and some people get to use it for free. Why is ProPublica so ungrateful and mean-spirited?

2. "Google searches for 'free tax filing' and other similar phrases still yield ads for a plethora of products such as TurboTax’s 'Free Edition'. ... TurboTax’s version of Free File — the one that doesn’t charge customers anything — typically won’t appear until the second page of search results.”

The Free Edition doesn't charge customers either. Anway, so what? If a person searches for "free tax filing," shouldn't he or she be informed that TurboTax’s Free Edition exists? Or is ProPublica out to prohibit Intuit from advertising? When is ProPublica going to try to prohibit the IRS from advertising its Free File program?

3. "Intuit places its ads strategically in searches for “IRS” and “free file,” among thousands of related search terms."

This baffles me. What is the author's point? Anyway, I did that search. The first non-ad search result was www.irs.gov › filing › free-file-do-your-federal-taxes-for-free. So Intuit is not making it difficult to find the IRS Free File website. The first non-ad search result shown in the screenshot in ProPublica's article is to https://apps.irs.gov/app/freeFile/. So again Intuit is not making it difficult to find the IRS Free File website. Where's the beef?

Additional comments

Nowhere in this article does ProPublica tell readers how to find the IRS's Free File website, which is where you will go if you click on the link in that first non-ad search result.

Again ProPublica doesn't complain about a person not passing the criteria to use the Free File version and later finding "a dead-end street" after wasting a lot of time entering data. However, ProPublica loudly protests somebody not passing the criteria to use the Free Edition version and not "finding a dead-end street" since they can switch to a pay version.

Using the IRS's Free File link, the second option says "Income above $69,000" & "Free File Fillable Forms."  Is a person required to have income above $69,000 in order to use said forms? No, but ProPublica hasn't accused the IRS of false advertising.

Addenda 2/23/2020

Justin Elliot has led ProPublica's smear campaign against Intuit, maker of TurboTax. He got this article published by HuffPost. The title, 'Congress Is About To Ban the Government From Offering Free Online Tax Filing. Thank TurboTax.' is both misleading and false. The IRS already offers 11 ways to file free online now, and Congress isn't trying to eliminate them. There are 10 software options in the Free File program. The 11th is the IRS's own Free File Fillable Forms. As said above, a person is not required to have income above $69,000 in order to use said forms.

Again Elliot fails to mention VITA,TCE, and AARP, which prepare millions of tax returns for free and online.

Free File, Gov't Audit, ProPublica

The Treasury Department's Inspector General for Tax Administration conducted an audit of Free File program. IRS management did not, but could comment on the audit and did. Here is the audit report. Following is a summary.

To participate in the Free File program, taxpayers must access the IRS.gov Free File web page and choose a software application there, which directs them to a provider's (member's) website, e.g. TurboTax. Many taxpayers are unaware of this requirement  (They believe wrongly they can go directly to the provider's website.) Once on the provider's website, taxpayers are not guaranteed a free return filing. On the Free File site, the taxpayer faces a myriad of criteria for being able to utilize the various software applications.  Even if the taxpayer decides that he or she meets the criteria initially, upon entering his or her return information, the taxpayer could then be informed that the return no longer qualifies for free filing.

The modified agreement between members and the IRS requires the member to direct the taxpayer back to the IRS.gov Free File web page, where the taxpayer must restart the process to select a Free File offer. However, at this point the taxpayer has spent significant time on attempting to file, and thus may prefer to pay a fee rather than restart the time-consuming process. The auditor suspects this is why providers do not disclose all of their criteria on the IRS.gov Free File web page.

The auditor made 8 recommendations. The first 3 follow.
1. Better advertising of the Free File program and how to use it.
2. Require providers to fully disclose all criteria on the IRS.gov Free File web page.
3. Establish goals and performance metrics for the Free File program.

Regarding #2, IRS management said it had seen no evidence of any additional criteria being used to charge taxpayers!

How did ProPublica respond here?
1. They used the "scathing" audit as a chance to repeat their attacks on providers such as TurboTax and H&R Block.
2. They described the recommendations of the auditors.
3. They excused the IRS due to budget cuts

What's missing from their response? They said nothing at all about the scenario described above where the taxpayer attempts to use one of the Free File software application but fails. Like I wrote here, ProPublica invokes a double standard -- one for providers and a different one for the IRS! In ProPublica's view, all blame for the incomplete criteria on the Free File web site goes to the providers and none to the IRS, despite the site being owned by the IRS. I don't agree with the auditor's suspicion stated above. Hypothetically, if the criteria were complete, it would be more complicated, and even more taxpayers would be thwarted from using it. And who would ProPublica then blame for that? The providers 100% and the IRS 0%, of course.

Yahoo News, CBS News, and Daily Beast parroted and spread ProPublica's story.

In my personal experience as a volunteer, most taxpayers who come to us want help. Many want somebody else to do the work for them. Dealing with the software themselves alone is unpleasant. VITA and similar sites offer the most help in person. Software vendors' paid products offer far more help than IRS.gov Free File.

ProPublica is finally helpful

Only four days ago I summarized ProPublica's past efforts to smear income tax software vendor Intuit, maker of TurboTax. This was done without trying to inform readers about how to file for free. ProPublica has done the latter here, finally!

Kudos to them. Regardless, their article missed three ways.

1. There is no mention of AARP Tax Aide. This service's target clients are low- and moderate-income taxpayers and, of course, those who are retired. The criteria they use to decide who they can file for and who they can't aren't as simple as the other free services. It's based on specific IRS Forms, sometimes specific sections or lines on such Forms, and the filer's specific data. The service is in person. Trained volunteers at the sites file online for you. You need to call to make an appointment.

2. There is no mention of the IRS's Free File Fillable Forms. I can only give a "signpost" to the Forms now since the IRS is not allowing filing yet. Regardless, the signpost page gives some info about the capabilities and limitations. The programs in the Free File Program (or Alliance) guide the user's input and complete the tax forms in background, but this one does not. Generally speaking, you need to know what IRS Forms you need and have the ability to do the job almost like using the IRS's paper Forms directly. Like the signpost page says, it won't help you file a state return.

3. There is no mention of CreditKarma. It is not part of the Free File Alliance, but it is as easy to use as the programs on the Free File Alliance and without their limitations.

News about free filing income taxes

The Internal Revenue Service (IRS) signed a new agreement with an alliance of income tax software vendors (TurboTax, H&R Block, etc.) that will allegedly make it easier for filers with simpler tax returns to file for free. Forbes has an article about it. The Wall Street Journal has an article (paywalled) about it.

The nonprofit newsroom ProPublica played a big role in getting this new agreement. ProPublica published several articles alleging that makers of tax prep software, especially TurboTax, tricked people into using its own pay products rather than sending them to the Free File Alliance. Also, ProPublica alleged that TurboTax, etc. hid the Free File Alliance from search engines. There is a grain of truth in this. It happened if the searcher used search terms such as {free file income taxes}, but it did not occur if "IRS" or "Alliance" were also included.

A class-action lawsuit was filed against Intuit, the maker of TurboTax. It was probably inspired by ProPublica.

I wrote about ProPublica's articles a few times, mostly in May 2019. The first one is here. It was clear to me that ProPublica's main goal was to smear Intuit, and that ProPublica's reporting was very deceptive.

1. ProPublica gave several examples -- some of real people and some pretend -- attempting to file for free using TurboTax's free version not on the Free File Alliance and learning they didn't qualify. Every time they ignored the caveats -- which could be read before using the software -- for using that particular free version.
2. The user in ProPublica's examples was always blameless; TurboTax got all blame.
3. ProPublica never tried to advise readers about how to find the Free File Alliance.
4. ProPublica  never gave alternative ways of filing for free, e.g. the IRS's VITA program, AARP Tax Aide, or the IRS's Free File Fillable Forms.
5. ProPublica never explained that the free versions of TurboTax, etc. not on the Free File Alliance had been fit to the qualifying criteria for using Form 1040EZ, and that the IRS eliminated Form 1040EZ effective for the 2018 tax year.

This article about the new agreement features an interview with one of the major authors of the ProPublica articles. He says that only about 3 million filers use the Free File Alliance, whereas about 100 million filers are eligible to do so. Why the big difference? He doesn't offer an answer. Mine is that a lot of filers (1) don't have the computer skills, (2) use VITA or AARP Tax Aide*, (3) believe they lack the knowledge to use the software, (4) are very willing to pay for software, or (5) are very willing to pay another person to do the work and file for them. Contra ProPublica, I much doubt it is because TurboTax, etc. "hid" the Alliance and "tricked" filers. We will see how much the number of filers using the Alliance increases in the next couple years.

*About 5 million people combined use these.

ProPublica Targets TurboTax Again #3

Trump’s Tax Law Threatened TurboTax’s Profits. So the Company Started Charging the Disabled, the Unemployed and Students.

Oh my. It’s more deceptive reporting from ProPublica, along with 100% blame for Intuit (maker of TurboTax) and 0% blame for the tax filer.

In ProPublica’s narrative Kristan Obeng gets and deserves no blame, despite the following:

1. she waited until the last minute to file

2. she ignored or didn’t understand the caveats for using the Free Edition

3. if she had heeded the caveats, she would not even tried using the Free Edition

4. she plowed ahead anyway, only to find a roadblock

5. rather than seek out other alternatives that would have let her file for free – Free File Alliance, VITA, AARP Tax Aide, the IRS’s Free Fillable Forms, do a paper Form 1040 – she took the easy road of following Intuit’s prompt, which is not a command, to use a pay version of TurboTax.

Substitute “ProPublica writers” for “she” in #2 - #4 and #2 - #4 describe perfectly what the ProPublica writers have done with every example in their articles in order to try to vilify Intuit. And again, their narrative omits mentioning any of the alternatives in #5. And, of course, the IRS gets no blame for eliminating Form 1040A and Form 1040EZ starting with the 2018 tax year.

Edit: I put the above as a comment on ProPublica (linked above).

Previous posts about ProPublica and TurboTax:
ProPublica Targets Free File Tax Preparers
ProPublica Targets TurboTax

    TurboTax, Forbes, ProPublica

    ProPublica and "prefilled filing"

    ProPublica Targets TurboTax Again

    ProPublica Targets TurboTax Again #2

ProPublica Targets TurboTax Again #2

TurboTax Uses A “Military Discount” to Trick Troops Into Paying to File Their Taxes

I placed the following comment on their website. It might be deleted.

This article is deceptive. It ambiguously uses “Free File”, which may refer to (1) the Free Edition on TurboTax web-sites, or (2) the free version of TurboTax in the Free File Alliance. A military person with less than $66,000 income can file free using #2. However, some cannot do so using #1, such as Zimmerman. She wanted a retirement savings credit, and it not being supported by #1 is disclosed. Click on “Simple tax returns” and a popup appears, saying that the TurboTax Free Edition does not support credits, deductions and income reported on schedules 1-6. The retirement savings credit is claimed on Schedule 3. Hence, the Free Edition does not support it.

If Zimmerman had included “Alliance’” among her search terms, a link to #2 would have been among the top results.

Some implicit premises behind ProPublica’s rants against TurboTax follow.

- TurboTax is responsible for making its web-pages fool-proof.

- TurboTax is 100% responsible for any user’s lack of knowledge, effort, or searching skills, such as omitting “Alliance” among the search terms.

- TurboTax should direct any user who might be able to file free to the Free File Alliance, where TurboTax competitors are equally prominent. How often do you see ProPublica directing viewers to read its competitors’ websites?

If ProPublica wanted to live up to its motto “Journalism in the Public Interest”, then it would do another article. The article would clearly distinguish between #1 and #2 and cover important differences between the two. Its aim would be to educate the public rather than take pot-shots at TurboTax.

ProPublica Targets TurboTax Again

ProPublica targets TurboTax again here. They show an internal video of Intuit’s CEO defending Intuit from the numerous attacks on Intuit and TurboTax made by ProPublica. ProPublica alleges that Intuit has steered people away from the IRS’s free file site and to other TurboTax versions. They pooh-pooh the CEO’s defense.

The CEO says ProPublica’s “articles have been written and published in the context of a specific wider political agenda. That agenda is to create a centralized government system of pre-filled tax returns.” The authors reply, “But we don’t have a political agenda.” I don’t buy that. Who is “we” – the authors or ProPublica? ProPublica has advocated what the CEO truthfully said (link). I posted about it yesterday. Advocating the IRS or Congress do something is having a political agenda. 

The authors also show two Google searches they did, with the top search result of each being TurboTax web-pages. Like I said two days ago, when a user doesn’t include “IRS” in the search criteria, why should the user be directed to an IRS web-page? Similarly, when a user doesn’t include “IRS” or “Alliance” in the search criteria, why should the user be directed to an IRS web-page or the Free File Alliance web-page? Yet apparently the ProPublica authors believe the user should be directed to an IRS web-page or the Free File Alliance web-page, as if their wish should trump the user's input. That is ProPublica trying to bully.

Moreover, the searches they did were April 10 and April 15, a month ago. I used the same search terms a few days ago and the top search result for both directed me to the version of TurboTax on the IRS free file site. The authors did not include that fact in their article. I assume Intuit had something to do with the new search result. But ProPublica did not cheer the change or thank Intuit. What’s good for the goose is good for the gander. Deliberate or not, ProPublica’s article hid -- at least didn't reveal -- the new top search result!

This latest article is like their earlier ones – biased, deceptive reporting. Pretty clearly their goal has not been to inform readers about how to find the Free File Alliance, but to smear Intuit and TurboTax.

P.S. The authors note that only around 3% of eligible taxpayers have used IRS Free File. In an earlier article (April 26), ProPublica said 70% of taxpayers are eligible for free options from TurboTax and other tax software products. So what? Using them takes time, skill and the willingness, which a person may not have. It seems that in ProPublica's opinion none of these matter; it's entirely the fault of Intuit, H&R Block, etc. In addition to free software products, there are many VITA sites and AARP Tax Aide sites that offer free filing. 

ProPublica and "prefilled filing"

ProPublica and others have advocated the IRS establish "prefilled filing."  Essentially, the IRS pre-fills a tax return and sends it to the taxpayer for signature, which the taxpayer can accept or reject. Supporters say that the IRS already has the data (W-2s, etc.) to do it.

A ProPublica story more than two years ago supported the idea, but complained that TurboTax's maker Intuit, H&R Block, and others in the tax preparation business have objected to it and spent a lot of money lobbying against it. Another ProPublica story published in 2013 did the same.

What's missing from both stories? Both authors were oblivious to the big "elephant in the room," self-employed people. There are millions of them -- small business owners, farmers, plumbers, electricians, lawn workers and landscapers, Uber drivers, restaurant owners, free-lancers, etc. The IRS does not already have the data to do "prefilled filing" for them (see next paragraph). There are also many smaller "elephants" -- filing status change, change in dependents, deductions, credits and maybe more.

Even this Tax Foundation article about pre-filled filing doesn't mention the self-employed, who must file Schedule C (or C-EZ) and Schedule SE along with Form 1040.

Such "prefilled filing" would discriminate against the self-employed. The IRS would provide a free service for those who aren't self-employed. Yet the IRS would force the self-employed to spend hours and/or money to do their own tax returns. It would exemplify unequal treatment before the law.

TurboTax, Forbes, ProPublica

The people at ProPublica may have believed they were the first to write about the difference between  TurboTax's Free Edition and TurboTax's Free File Alliance Edition. ProPublica got a lot of attention from politicians, some IRS people, and other media for writing about it. However, they were not the first to write about it.

Forbes had this story more than 3 years ago. The author didn't qualify for using the Free Edition due to having a Health Savings Account, and used a pay version of TurboTax to file, unaware of the Free File Alliance. Later she learned she could have filed using the Free File Alliance for $0.

She wrote: Moreover, if a low-income person who would qualify for the Free File Alliance Edition starts doing his or her taxes with Turbotax's Free Edition and needs a form that is not supported in the Free Edition, but is supported in the Free File Alliance Edition, Intuit will not transfer the user to the Free File Alliance Edition. (I did not quote her verbatim, but modified her words only to make the terminology consistent with my first two paragraphs.)

Unlike ProPublica, she didn't accuse TurboTax's maker Intuit of deception and fraud. She wrote about what happened to her and differences between the two TurboTax editions without harshly judging Intuit.

There is another fact pertinent to ProPublica's stories (#1, #2) the authors did not mention. Prior to 2018 the IRS allowed filing with Form 1040A or Form 1040EZ for persons with simpler tax situations. These forms were eliminated for 2018 tax returns. A filer could only use Form 1040. The eligibility criteria for using TurboTax's Free Edition versus TurboTax's Free File Alliance Edition prior to 2018 were likely tied to the rules for using Form 1040A or Form 1040EZ. The IRS's changing its rules did nothing to lessen ProPublica's invective against Intuit.

ProPublica Targets TurboTax

Yesterday I commented on a ProPublica article about income tax filing. Today I comment on another ProPublica article related to the first.

ProPublica says TurboTax Deliberately Hid Its Free File Page From Search Engines.

Its subtitle is: "The makers of TurboTax as well as H&R Block promised the IRS to offer free filing for many Americans. But they have kept Google from seeing it."

ProPublica alleged:
(1) TurboTax uses deceptive design and misleading advertising to trick lower-income Americans into paying to file their taxes, even though they are eligible to do it for free.
(2) Intuit, the maker of TurboTax, is deliberately hiding the truly free edition — TurboTax Free File — from Google Search.

I allege deceptive reporting by ProPublica. Since Google search results have been modified recently (per the April 28 update in the article), I cannot replicate the earlier situation. However, doing two different searches with Google now is a good indicator of the earlier situation. Minutes ago I did two searches:

Search #1: free file TurboTax

Top search result: TurboTax Free File Program, Part of IRS freefile

Search #2: IRS free file TurboTax

Top search result: IRS freefile site

I suspect the earlier situation was:

Search #1: free file TurboTax

Top search result: TurboTax Free Edition, which is not Part of IRS freefile

Search #2: same as above

Note the different Search #1 top search results, earlier versus later. Apparently ProPublica alleged the earlier top search result was deceptive trickery, since it is not an IRS site (it's a TurboTax site) and somebody might need to pay Intuit some money to be able to file. So I ask the reader, does a searcher not being directed to an IRS site when "IRS" is not included in the search criteria constitute "deliberate, deceptive hiding" by TurboTax? I don't, but it seems ProPublica does!

Of course, I don't know what paths actual filers took to the TurboTax Free Edition and tried to file with it but eventually used a pay version of  TurboTax to file. The paths probably varied a lot. But I believe my search criteria and the earlier Search #1 path are very plausible. I doubt that ProPublica has any better idea about what paths actual filers took either.

Anyway, in ProPublica's narrative, it is never the taxpayer's failure to find the no-pay path, but always TurboTax's deliberate deception and fraud.

ProPublica Targets Free File Tax Preparers

Lately some politicians and senior IRS officials launched a review of TurboTax's and H&R Block's free file software (link). They were apparently inspired by articles written by ProPublica, such as this:   Here’s How TurboTax Just Tricked You Into Paying to File Your Taxes.

ProPublica claims to be "a nonprofit newsroom that aims to produce investigative journalism in the public interest." The people at ProPublica allege they tried the TurboTax software, entered pretend info, and then were told they could not file for free after all, as described in their article. They wrote the following:

"We started the process by creating the profile of a TaskRabbit house cleaner who took in $29,000. We entered extensive personal information. TurboTax asked us to click through more than a dozen questions and prompts about our finances.
     After all of that, only then did we get the bad news: TurboTax revealed this wasn’t going to be free at all. Turns out the house cleaner didn’t qualify because he is a independent contractor. The charge? $119.99."

Where did they do this? Probably here, or here, where clicking on 'Simple Tax Returns' shows a popup that gives situations not covered in TurboTax Free Edition, including business income, i.e. that of an independent contractor. So they either missed or ignored the caveat. Also, that software is not on the IRS's free file site.

This IRS site (as directed by the Free File Alliance) is the IRS's starting place for filing federal income taxes for $0 online. Clicking on the blue button 'Start Free File Now' does not direct you to a site to start entering data to file, but rather to a page of several free file software offers, including one by TurboTax and another by H&R Block. The TurboTax one says you can file free if you qualify (no guarantee).

So I selected the latter and I did a similar thing myself, pretending to be self-employed with income of $29,000, only not from TaskRabbit. TurboTax did not disqualify my pretend input for being an independent contractor nor say I needed to pay.

ProPublica also wrote the following:

"Then we tried with a second scenario. We went back to TurboTax.com and clicked on “FREE Guaranteed.” This time, we went through the process as a Walgreens cashier without health insurance, entering personal information and giving the company lots of sensitive data.
     Again, TurboTax told us we had to pay — this time because there’s an extra form if you don’t have insurance. The charge? $59.99."

Again, where did they do this? Probably here, or here, where clicking on 'Simple Tax Returns' shows a popup that gives situations not covered in TurboTax Free Edition, including things reported on Schedule 4. The so-called  "shared responsibility payment" for not having health insurance goes on Schedule 4. So again the ProPublica people missed or ignored the caveat. Again, that software is not on the IRS's free file site.

Per their description the ProPublica people did not use the IRS's gateway to file free! But I went to the TurboTax site via the IRS gateway. I entered data for a person with a W-2 and no health insurance. The software accepted it, even calculated the so-called  "shared responsibility payment", and did not say I needed to pay to file!

The Los Angeles city attorney filed a lawsuit against H&R Block and TurboTax's maker Intuit, alleging that the companies defrauded low-income taxpayers.

I assume ProPublica would side with the attorney. What principle are they invoking? I allude to the answer with an analogy. A customer is ready to buy something at Kroger. A Kroger employee knows the customer could buy the same thing at Walmart for significantly less. On said principle, the Kroger employee defrauds the customer if he or she doesn't tell the customer about Walmart's price. Arguably on said principle, Kroger defrauds the customer if there is no prominent sign by the product telling about Walmart's lower price.

P.S.:
1. I had never used any version of TurboTax before seeing ProPublica's reporting.
2. The so-called non-profit ProPublica had a $10 million profit (revenues minus expenses, and 35% of revenues) in 2017 and a $6.7 million profit (22% of revenues) in 2018. 😊 In 2017 the two highest paid employees were paid almost $400,000 each (> $400,000 with other compensation). Source: Annual Statements and Form 990.