Intuit – the parent company of TurboTax – allegedly pushed a number of lower-income taxpayers toward paid products as it faced a decline in revenue resulting from President Trump’s tax law, according to a new report.
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The Tax Cuts and Jobs Act enacted a number of reforms to the U.S. tax code, including doubling the standard deduction – which reduced the number of filers who itemized. This past filing season was the first for filers under the new tax structure.
TurboTax typically charged $100 for filers who were filling out returns that included itemized deductions for things like mortgage interest and charitable donations. However, according to ProPublica, knowing it would likely lose revenue in that “Deluxe Edition” service category (since more people had simpler returns and would be able to file for free), the company shifted strategies.
Citing two people familiar with the process, ProPublica said the company began charging low-income individuals with disabilities, people without jobs and those who owed student loan debt for certain services – despite the fact they all had previously been able to file for free.
Among the forms that taxpayers allegedly needed to pay for (which had previously been free) was one for a tax credit for poor filers and the elderly who receive disability benefits. Another was for lower-income households that received a credit for putting money into retirement accounts and a third was for people collecting unemployment.
A former staffer told ProPublica that about 30 percent of users would have been required to use a paid product, even though they had previously been eligible for the free edition.
In response to ProPublica’s report, an Intuit spokesperson said the company believes tax simplification is good for the country, while noting that more taxpayers filed with TurboTax last year and paid nothing more than any other year in the company’s history.
The spokesperson also said that its changes to 2018 free eligibility “aligned with the new IRS Form 1040, without schedules.”
As previously reported by FOX Business, Intuit is said to have tricked taxpayers into paying for services by hiding the free-service options from Google searches and misleading advertising. It reportedly did that by adding code on its site telling search engines not to list its TurboTax Free File in search results.
Individuals with incomes of $66,000 or less are eligible to file for free through the IRS’ Free File program – a partnership with third-party preparers. While 70 percent of Americans are eligible to file through the program, only 2.5 percent did so in fiscal 2018 – which some have attributed to the companies’ deliberate efforts to hide the products.
Intuit CEO Sasan Goodarzi sent an 11-minute video to workers saying the company was trying to help its customers by prioritizing educational content in search.
The IRS said it would bring in an outside contractor to review the Free File program, following a request from a group of senators asking it to do so.