Getting Worse Part 1: Intuit Routinely Lies To Customers To Avoid Paying Refunds For Tax Prep Work

from the free-as-in-free dept

It appears Intuit has decided to make things worse rather than better. Just after tax season, we discussed ProPublica’s excellent research article on the extreme lengths Intuit had gone to keep its Free File service an unknown to the public. This service is the result of an agreement the top tax prep companies out there reached with the IRS. Essentially, by promising to allow members of the public that earn under a certain amount of money to use their services to file their taxes for free, the IRS in turn has agreed not to pursue its own free to file service. It’s an extremely dumb deal for any number of reasons, one of which being how much more efficient it would be for the IRS to carry the weight here, given that it already has all the information most taxpayers need to file.

The other reason, as it turns out, is because Intuit has decided to behave pretty much as cynically as it possibly can. As we detailed in our previous post, the company engaged in a strategy coupling the buying of ads for Google searches and hiding the free to file via the robot.txt file. As a result, something like 3% of eligible taxpayers file for free using the system, while Intuit set up a layer of websites and landing pages all designed to direct the public to paid services, without ever telling them they qualified for free to file tax prep.

As a result of the ProPublica post, many who paid for these services called up Intuit and asked for refunds. If you thought that this public light on shady behavior would lead to an attitude adjustment for Intuit, you’re sadly mistaken.

We’ve heard from 16 people who say they were denied refunds and told that the truly free version — Free File — is a government product that’s not run by TurboTax. Ten others reported being told that ProPublica’s stories were inaccurate, or that our coverage is “fake news” or “fictitious.”

None of that is true.

It’s quite hard to see how this isn’t fraud. Having Intuit reps tell consumers that the free to file program is run by the IRS and not Intuit is a lie. Saying the program is “owned” by the IRS is another lie. Saying that the news organization that is currently airing all of this dirty laundry was so mistaken that a retraction was about to be run is a lie.

Laurie from Washington said she was told by a TurboTax agent that ProPublica was going to run a retraction. (Our stories are accurate, so there’s nothing to retract.) Laurie was charged $130 by TurboTax. Her adjusted gross income was just $376.

An Intuit spokesperson previously said that no material provided to call agents included “derogatory terms about ProPublica.”

Which may be technically true. However, it strains credulity for anyone to suggest that all of these stories are not the result of some centralized communication customer service reps have been instructed to use. It’s far more likely that these are talking points given to reps as a way to try to stave off a wave of refunds for services that ought never have been rendered. That becomes all the more likely having seen some of Intuit’s internal communications about this whole story (more on that in a separate post).

If true, that would be extremely stupid, considering that Intuit is already in legal hot water over all of this.

In a separate development on Monday, the Los Angeles city attorney sued Intuit and H&R Block under California’s unfair competition law. The two suits, which cite ProPublica’s reporting, demand that the companies pay penalties and restitution for deceiving customers.

“Low-income people without someone to stand up for them have not been able to take advantage of what should be a free service,” City Attorney Mike Feuer said in an interview. “That’s wrong.”

It appears to be an open question just how deep a hole Intuit wants to dig for itself. As we’ll see in the separate post, it appears those in charge still have shovels in their hands.

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Companies: intuit, propublica

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Comments on “Getting Worse Part 1: Intuit Routinely Lies To Customers To Avoid Paying Refunds For Tax Prep Work”

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19 Comments
David (profile) says:

Am I the only one bothered by the fact that there is a multi-billion dollar industry centered around paying personal income taxes? Taxes should be so simple that anyone can do their own in no more than a couple minutes. I would like a flat percentage. No deductions or credits. The money is taken out by your employer(s) with no need to file anything.

Thad (profile) says:

Re: Re:

Am I the only one bothered by the fact that there is a multi-billion dollar industry centered around paying personal income taxes? Taxes should be so simple that anyone can do their own in no more than a couple minutes.

Agreed.

I would like a flat percentage. No deductions or credits. The money is taken out by your employer(s) with no need to file anything.

And now you’ve lost me.

A flat tax would be deeply regressive. It would be a handout to monied interests in much the same way that our current system is.

Anonymous Coward says:

Re: Re: Re:

A flat tax would be deeply regressive.

No. A flat tax would be flat, by definition. A regressive tax is one where earning more money reduces your percentage liability. A progressive tax is one where earning more money increases your percentage liability. Now, if you meant that a flat tax hurts low income earners more than high income, that’s an argument to discuss, but please get your descriptions right. Calling a flat tax regressive is wrong by definition and just confuses the discussion.

PaulT (profile) says:

Re: Re: Re: Re:

"Now, if you meant that a flat tax hurts low income earners more than high income, that’s an argument to discuss"

That is the absolute truth. A person who needs to spend most of their income to survive is by definition harmed more by flat taxes than people who who invest or save most of their income. That is regressive, and you’re a fool if you think it’s fair.

JoeCool (profile) says:

Re: Re: Re:

A national sale tax is the best answer. Rich people buy more. Not only that, but they buy higher priced items as well. There would be no paperwork for regular people at all. Businesses already collection sales tax for local and state level in most cases, so national is easily handled.

Exclude groceries (most local and state sales taxes already exclude groceries, so again, it’s not an issue to businesses), and medicines. Everything else is fair game. If poor people spend less to avoid the extra tax, good. They should be saving more of what little they have in the first place. You’d also cover any difference easily by closing damn near all taxes scams the rich go through trying to avoid paying taxes.

Anonymous Coward says:

Re: Re: Re: national sale tax

A national sale tax is the best answer. Rich people buy more.

No. As a proportion of their wealth, rich people buy a lot less. All that money that is hoarded would attract zero tax.

National sales tax is another lie put out by rich people to fool the 99% into paying more tax.

Anonymous Coward says:

It takes a lot of effort to 'maximize' the cost too

So to make all of this far more upsetting, don’t forget the amount of effort that it must take in order to maintain 2 separate products rather than have a lower cutoff in just one product that removes the cost for use.
So Intuit maintains 2 tax products that intentionally do not have overlap (for example. separate web sites), so they have a higher labor cost… the only sane reason for doing something like this would be if you were going to push folks to the paid product; even when it does not benefit the ‘client’.

Nothing about this was about trying to meet the spirit of ‘free tax filling’… it’s all about increasing market share and ‘upselling’ the client

Anonymous Coward says:

I have some experience on the edge of calculating taxes. It’s complicated, and it’s especially easy for people to live blithely without a clue.

In countries where business is nationalized and the government grants a wage to everyone through its wholly-controlled agencies, a flat tax would be practical. It would be extraordinarily stupid, though, since the same effect would be had by simply paying lower wages.

In the U.S., where there are more self-employed people than union members, where for millions of people, "income" is not remotely correlated with "cash and checks received for goods and services rendered", tax returns are going to be complicated, because they have to track all the complexities (and inanities) of traditional-ritual-and-customary accounting practice.

It’s also worth mentioning that "flat" tax (that is, removing the progressive rates for higher-income people–not exactly the same thing as rich people!) wouldn’t simplify the tax return much at all. The progressive rates are extremely simple to calculate. The complexities are caused by all the different social-engineering provisions (encouraging people to own their own homes and take care of children, encouraging even poor people to look for gainful work, having pity on people buried under medical expenses, etc., etc.). It’s hard to find any single provision and say it is unfair or detrimental to society. Do you really want to soak a farmer with massive taxes, the first time in five years he hasn’t lost money to crop failures? Do you really want to cripple a cancer victim who’s just returning feebly to work after a million dollars of unpayable medical bills?

The result … is complexity. And yes, complexity carries its own social costs. But it’s almost impossible to propose any change that doesn’t primarily affect poor people. Sales tax? DUH, rich people don’t HAVE to spend money in the U.S.! (Bush’s sales tax on luxury yachts simply closed down the U.S. luxury yacht business, because people bought their boats in Mexico….) It’s well documented that poor people spend a larger percentage of their income on sales-taxable items than rich people do.

I wouldn’t suggest no changes are possible. I’d just say suggestions by people who don’t know the existing code well are almost as likely to be useful as, say, suggestions about redesigning the Linux kernal from Investment bankers.

Whoever says:

Laurie was charged $130 by TurboTax.

$130 !!! That’s ridiculous.

I bought a competing tax program for less than $100 and we used it to do my return and two of my kids used it to do their returns, all including a state return each, with no further payments, all e-filed. My tax returns includes income from rental properties and investments, so it isn’t a simple return.

She really was ripped off.

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