It's tax week, and lobbying is still rotting the system

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It’s tax season (federal taxes are due April 18), and as millions of people crank up their computers and download Intuit’s TurboTax or H&R Block’s software, they are the unwitting victims of a multiyear, multimillion-dollar lobbying campaign by those companies to make you pay them to do your taxes. The dirty little secret is that the IRS already has the tax information they need about your income and how much tax you’ve paid. That’s reported to them with every paystub from your employer.

In fact, for most people the IRS could just send out pre-filled forms that taxpayers would only need to sign off on. The vast majority of people, about 70%, use the standard deduction and don’t bother to itemize, and could thus let the IRS do all the work—since the IRS has already done all the work! But Intuit and H&R Block exist precisely to make money off of you by keeping taxes far more complicated. They’ve even circumvented the one big effort on the part of the federal government to change that.

For about 20 years, the Free File Alliance, a group of private-sector tax preparation companies, have been working in partnership with the IRS to provide free online tax preparation and filing services. An investigation by public interest news organization Propublica in 2019 documented how the companies behind both TurboTax and H&R Block hid the free option for filing on their websites. Intuit actually added code on its webpages to block Google from locating the free file site in searches. Following Propublica’s exposé, Intuit changed the code so that the free version showed up in searches.

TurboTax has not been part of the Free File program since 2020, and has been under investigation by the Federal Trade Commission since Propublica’s investigation in 2019. Last month the investigation has started to show fruit. Intuit was sued by federal regulators last month for continuing deceptive practices in advertising with its “bogus advertisements pitching ‘free’ tax filing that millions of consumers could not use.” It also filed a complaint “asking a court to order Intuit to halt its deceptive advertising immediately” to prevent “ongoing harm to consumers rushing to file their taxes.”

“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, director of the Bureau of Consumer Protection. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.” Anyone who received a 1099 form for work in the gig economy, or anyone who earned farm income, can’t use TurboTax’s free product. The income limit for using free file this year, by the way, is an adjusted gross income of $73,000.

So if you haven’t already done your taxes, don’t use TurboTax on principle if for no other reason. But also because they’ve been lying to you about their “free” service.

In the meantime, here’s Sen. Elizabeth Warren (D-MA) talking about one of her long-term projects, the Tax Filing Simplification Act, and how these companies have been ripping us off for many years, not to mention making this whole process a lot more difficult than it needs to be.

NEW: Tax filing could be free right now. The IRS already has the authority to create a free, easy-to-use online tax filing tool, as @EWarren explains. Instead, Americans will spend $31 billion this year for the privilege of paying services like TurboTax to file for them. pic.twitter.com/UDBTtAoPPL

— More Perfect Union (@MorePerfectUS) April 11, 2022