Still Terrible: Intuit Hit By FTC Lawsuit Over Deceptive ‘Free Tax Filing’ Advertising Practices

Legal Issues

from the it's-about-time dept

It must be tax season, because here we are yet again talking about Intuit and the company’s skullduggery when it comes to offers for “free” tax filing. You can go back and look at the plethora of posts we have done on all of this. The quick summary for you is that Intuit has deceptively advertised “free to file” programs for those it later says don’t qualify for free filing once the customer is nearly done inputting tax information, and that Intuit has had a long history of doing everything possible to hide the actual free options available to consumers in order to instead milk money from low-income taxpayers and military veterans. Notably, Intuit participated in the IRS’ free filing program, though the IRS actually announced plans to cut out the third parties in part because of Intuit’s bullshit practices.

But if you thought that Intuit would have learned any kind of lesson from all of this bad press and federal government scrutiny, you’d be sorely mistaken. Intuit continued advertising its TurboTax product as a method for “free filing” of taxes, in many cases in ads that made it sound like no other word other than “free” even existed in the English language. Instead of the IRS, this time it’s the FTC that has come knocking on Intuit’s doors, having filed an administrative complaint against the company for deceptive advertising. You can see the entire complaint embedded, but the FTC’s site has a nice summary of what it’s after here.

The Commission alleges that the company’s ubiquitous advertisements touting their supposedly “free” products—some of which have consisted almost entirely of the word “free” spoken repeatedly—mislead consumers into believing that they can file their taxes for free with TurboTax. In fact, most tax filers can’t use the company’s “free” service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.

“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.”

Is this kind of too late given how deep into tax season we are? Yes! Do I believe that even this action will be enough to convince Intuit to stop being Intuit? Only if very real dollar amounts are involved in this action, which I don’t believe will be the case. But what this absolutely does represent is a continuation of the uptick in federal involvement and pressure on the company for what are absolutely bald-faced deceptive advertising practices.

The reason Intuit does all of this is because it gets to decide for itself who its free program applies to. Very little is done in advertising to alert the public that there are fairly strict restrictions for the free program, instead leading many consumers to spend time gathering and entering all of their tax information into TurboTax’s “free” filing website… only to be told at the very end that they don’t qualify to file for free. At that point, many in the public either give up on the dream of filing for free, or simply believe that they cannot file for free anywhere. So they fork over money to Intuit.

As detailed in the complaint, Intuit engaged in a years-long marketing campaign centered on the promise of “free” services. These ads have run during major events, including the Super Bowl, and have also aired during this year’s NCAA Basketball Tournament. In spite of this advertising, many consumers who took the time to gather their documents, entrust their personal information to Intuit, and begin the filing process found that they could not file their taxes for free.  

The FTC’s involvement is a good start. But federal action needs much bigger teeth than what is on offer from the FTC if the government wants to put a stop to Intuit’s bullshit.

Filed Under: deceptive advertising, free file, free filing, ftc, taxes
Companies: intuit

Streaming Providers Tell FCC That Taxing Streaming TV Would Be Dumb

Broadband

from the this-is-why-we-can't-have-nice-things dept

For years, we’ve noted how telecom and media giants have been trying to force “big tech” to give them huge sums of money for no reason. The shaky logic usually involves claiming that “big tech” gets a “free ride” on telecom networks, something that’s never actually been true. This narrative has been bouncing around telecom policy circles for years, and recently bubbled up once again thanks to telecom industry BFF and FCC Commissioner Brendan Carr.

At the heart of the lie is a nugget of truth. the FCC does desperately need to find more funding revenue to shore up programs like the Universal Service Fund (USF) and E-Rate, which help provide broadband access to schools and low income Americans. The programs are funded by a line item fee on phone lines and some limited telecom services, but with the former dying and the latter restricted, more money is needed (assuming we actually care about “bridging the digital divide” as much as we claim we do):

The funding mechanism that supports the USF is under significant duress. The “contribution base”—the revenues used to calculate USF contributions—has declined 63% in the last two decades, from $79.9 billion in 2001 to $29.6 billion in 2021. Meanwhile, the “contribution factor”—which is the USF fee assessed on interstate and international telecommunications service and certain telecommunications revenues—has increased from 6.9% in 2001 to a 29.1% in the fourth quarter of 2021. Assuming a continuation of historical trends, the contribution factor could approach 40% or more in the coming years. This situation is unsustainable and jeopardizes the universal broadband connectivity mission for our nation without immediate FCC reform.

So there needs to be reform. The problem: telecom and broadcast lobbying, and dumb partisan shenanigans once again risk ruining any serious adult policymaking.

The FCC recently announced it would be considering what has generally been heralded as a bad idea by many consumer groups and companies alike: expanding the USF fee contribution base to include “big tech.” The proposal is fairly large, and not only included a planned tax on streaming services, but a new tax on unlicensed spectrum and Wi-Fi (and effectively any device that uses it).

Public Knowledge lawyer Harold Feld has explained in detail why this idea (which he argues is largely promoted by the broadcast industry and NAB in a bid to target Microsoft for its “white space broadband” proposal) is dumb:

“The idea that a tax on unlicensed spectrum would only hurt Microsoft or “big tech” is absurd. The whole point of unlicensed spectrum is that it’s open for everyone to use. The effort by broadcasters to impose a Wi-Fi tax should be as laughably ridiculous as modem taxes and email taxes. But rather than simply deny the proposal, the FCC has put it out for public comment.”

Streaming companies and the MPA also, unsurprisingly, oppose the move, argue in a recent filing that leveraging such fees on streaming TV not only doesn’t make sense, it would be a logistical nightmare:

“Online services do not require Commission licenses to operate, there is no effective cap on the number of providers in the marketplace, and that number is always changing,” MPA said. “Online platforms, including streaming services, social media networks, advertising platforms, and online marketplaces, are continually entering and exiting the market, creating a situation in which the Commission would be unable to properly determine which firms must pay contributions.”

While it’s not surprising that streaming companies don’t want to be saddled with a new tax (even if it’s passed directly on to consumers), opposition goes well beyond that. Most objective recommendations for fixing the USF program involve applying USF fees more fully to broadband, or even the assignment of wireless phone numbers.

Telecom giants (which are often broadcasters) don’t want that. They very much like the current system where we throw billions of dollars in tax cuts, subsidies, regulatory favors, and other perks at them in exchange for networks they routinely only half deploy (with absolutely no repercussion).

A real reform of U.S. telecom subsidies and the USF program would almost certainly mean stricter oversight into how this gravy train gets distributed, and if you’re a company like AT&T (which recently got a string of merger approvals, massive deregulation, and a $42 billion tax cut for doing jack shit), that’s not really something you want happening.

Telecoms had already spent the last decade accusing companies of Google (despite the billions Google also pays for telecom transit and cloud infrastructure) of “getting a free ride.” The goal was always to saddle tech companies with the costs of upgrading and improving telecom networks to the benefit of telecom investors and executives. USF reform has proven to be the perfect opportunity to perpetuate and amplify those dated efforts with the help of captured policymakers.

Expanding the USF contribution base to streaming is something that we should at least have a conversation about. Again though, if you’re a policymaker genuinely serious about shoring up broadband access and its funding mechanisms, the very first thing you should be looking at is the billions of dollars thrown at companies like AT&T, Comcast, and Verizon in exchange for half-completed networks.

AT&T alone has been accused of ripping off the government for decades when it comes to school telecom subsidies. Frontier has been dinged several times for ripping off the government for fiber networks they then failed to deploy. Verizon has also been long accused of getting billions of dollars for half-completed projects. Real reform of this stuff would involve actually taking this fraud seriously.

While regulatory action is sometimes taken, it’s usually a decade after the fact, and involves paltry fines that are proportionally insignificant to the scope of the fraud perpetrated. That’s assuming telecom lawyers can’t simply avoid the fines altogether. If you’re serious about telecom subsidy reform on any level, fraud perpetrated by dominant sector monopolies should be the first topic of conversation.

You’ll notice this stuff is something telecom-allied FCC Commissioners like Brendan Carr just “forget” to mention. Like, ever. Part of the reason is just rank corruption and regulatory capture. Another part is that these companies are tethered to our patriotic domestic surveillance efforts, which tends to make them above reproach when it comes to meaningful accountability for absolutely anything.

I’d like to think the Biden FCC understands all of this as they contemplate what to do about the USF, but in the never-ending and noble political quest to nab headlines about how they “cured the digital divide” (which coincidentally rarely seems to fully involve seriously tackling telecom monopolization, competition, subsidy fraud, or state and federal corruption), you can never quite be sure.

Filed Under: big tech, broadband, digital divide, fcc, fraud, pipes for free, regulation, subsidies, taxes, usf

Biometric Tech Company ID.Me Continues To Swallow Gov't Agencies, Cause Problems For People Trying To Access Their Gov't Benefits

(Mis)Uses of Technology

from the questionable-claims,-extremely-limited-accountability dept

A private company, that leveraged a bold (unproven) claim about $400 billion in pandemic unemployment fraud into government contracts allowing it to (mistakenly) lock people out of their unemployment benefits, is hoping to use both of these dubious achievements to secure even more government contracts.

Here’s the claim:

Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

Here’s at least one immediate reaction to Halls’s claim.

“The greatest theft of American tax dollars in history has risen unabated to $400 billion, with nearly half of all pandemic unemployment spending lost to fraud by criminals,” declared Kevin Brady, the top Republican on the House Ways and Means Committee.

And here’s the reality:

In December, California, by far the largest state payee of benefits, said it had identified $20 billion in fraudulent unemployment payments during the pandemic, 11% of what it paid out overall. California was responsible for a quarter of all pandemic unemployment payouts in the U.S.; if its fraud experience held nationally over the past two years it would translate into roughly $95 billion. That’s a big sum, but still only a quarter of what Hall was estimating. And other states like Ohio and Texas have reported lower levels of fraudulent payments than California.

But it made for a hell of a sales pitch. ID.me is currently used to verify the identity of unemployment benefit recipients in 27 states. It also secured a $1 billion contract from the Department of Labor to modernize state systems used to handle dispersal of these benefits.

All of this snowballed into ID.me’s biggest get: the Internal Revenue Service.

If you created an online account to manage your tax records with the U.S. Internal Revenue Service (IRS), those login credentials will cease to work later this year. The agency says that by the summer of 2022, the only way to log in to irs.gov will be through ID.me, an online identity verification service that requires applicants to submit copies of bills and identity documents, as well as a live video feed of their faces via a mobile device.

That’s from Brian Krebs of Krebs On Security. His experience with the verification process was far from painless. The process requires users to take a live, video selfie from the same device being used to apply for the account. This means users can’t use a laptop/desktop computer and take the selfie on their phone, even though that would be the most convenient way to accomplish both tasks (apply and verify).

In Krebs’ case, the application process got stuck when ID.me came to a halt during the phone verification process, prompting a request for Krebs to reupload three identification documents. Then it told him to wait:

After re-uploading all of this information, ID.me’s system prompted me to “Please stay on this screen to join video call.” However, the estimated wait time when that message first popped up said “3 hours and 27 minutes.”

The system has glitches, as is to be expected from any system engaging in identification verification over the internet. But the problems experienced here are far from abnormal, and that’s going to cause lots of people lots of problems with tax filing season now underway. This only adds the IRS to the list of government entities that have discovered it’s not performing as well as advertised.

A log of complaints for California’s Employment Development Department (EDD), which signed up with ID.me in September 2020, details issues ranging from a transgender person being blocked from accessing benefits because the gender on their driver’s license didn’t match their passport to an applicant who went through ID.me’s verification process only to find their claim still on hold six weeks later. In a January 2021 letter to the EDD, California state Senator Anthony Portantino complained that his staff had been “inundated with urgent pleas” from constituents whose benefits were on hold as a result of problems with ID.me. “This recent purge has put thousands of legitimate claims in limbo, with no instructions for how to get out of ‘ID verification jail,’?” Portantino wrote.

Some of these problems can be traced back to ID.me’s facial recognition AI, which has yet to be independently tested, despite being the only option for many people seeking access to their unemployment benefits or tax information. There has been some sort of testing, but not with any results ID.me is willing to share with the public.

Hall says the company isn’t running images through a preexisting database, the way law enforcement does, and that it selects facial-recognition vendors that comply with federal standards, though he wouldn’t name them. The company also says ID.me put its facial-recognition software through two separate tests for racial bias in 2021 and found no evidence of discrimination.

And CEO Blake Hall continues to insist ID.me is stopping billions of dollars of unemployment and tax fraud, even though it would appear that a lot of what Hall considers to be thwarted fraud may just be the inadvertent thwarting of legit benefits claimants.

For example, between Jan. 28 and March 8, 2021, ID.me had 654,292 users start its verification process in California, according to data Hall provided. Just half of those users completed ID.me’s checks. Hall argues that any users who didn’t complete the process were clearly scammers.

[…]

On Nov. 17, 2020, for example, ID.me reported that the prior week, 101,050 people in California attempted to verify their identities with ID.me. Of those, just 40% succeeded. But you could see the frustrations unemployed workers and their advocates complain about playing out in the data: Almost a quarter of the people ID.me dealt with in California that week tried to get on a video call with a company rep, but only 10% of that group succeeded. More than 7,000 people also abandoned the ID.me process by either closing their browser midway through or having their session time out. Both situations are as easily attributable to tech glitches as fraud.

This isn’t very comforting. ID.me’s CEO seems willing to declare failures of the company’s system as victories against fraudsters. This unwillingness to even consider the possibility the system has flaws that might separate users from benefits or tax information isn’t something you want to see in someone running a company that has already nailed down more than half the country’s unemployment payments business. Becoming the point of entry for IRS accounts will just make local issues national issues.

It’s also not exactly comforting that one company holds so much biometric and personal data. That makes it a tempting target for malicious hackers, especially now that it’s also home to Internal Revenue Service data. It’s going to make people start asking for some sort of biometric data federalism — one that keeps the federal government from intermingling its sensitive info with state data stashes by using the same vendor to collect ID verification info.

Presumably, ID.me will get better at what it does. And it does appear to be doing everything it can to secure the information it’s collecting on behalf of several government agencies. But it’s being led by a CEO who is unwilling to allow independent inspection of its AI, who built his company’s business on a questionable assertion about pandemic-related benefits fraud, and who has an alarming tendency to blame system issues on end users or to portray ID.me’s failures as successful direct hits on benefits fraud.

That’s a lot of buck-passing for someone who is being entrusted with the financial, personal, and biometric information of millions of Americans. And it suggests if the shit ever really hits the fan, the CEO is going to ghost a bunch of taxpayers who were never given any input or options when it comes to accessing benefits that are rightfully theirs.

Filed Under: access, biometrics, facial recognition, irs, logins, privacy, taxes
Companies: id.me

Austin The Latest City To Try And Impose A Netflix Tax

Policy

from the gimme dept

Hungry to boost municipal budgets, a growing roster of states and cities have spent the last five years or so trying to implement a tax on Netflix, Hulu, and other streaming services. Sometimes (like in Chicago) this has involved expanding an existing amusement tax (traditionally covering book stores, music stores, ball games and other brick and mortar entertainment) to online streaming. Other times this has involved trying to leverage existing cable TV laws or ordinances to try extract their pound of flesh from Netflix. In both, it involves taking rules written for the physical world, and applying them to the internet. Often haphazardly.

That’s what’s happening in Austin, where the city just joined a growing Texas lawsuit trying to force Netflix to pay the same taxes as local cable providers. Texas law allows cable and video providers to deliver cable TV via publicly-owned utility poles on public land in exchange for remitting 5% of gross revenue to the municipality. So the argument has generally been because Netflix bits technically travel over those same lines, they should also be responsible for paying that tax:

“Streaming services such as Netflix, Hulu and Disney+ have their content moved through those lines, but they do not pay the fees imposed on traditional cable TV providers. Austin officials say they should.

The Austin City Council voted last week to join the coalition lawsuit against streaming providers. It often depends on state law and local guidelines, but such efforts often don’t go very well. Georgia, Indiana, Ohio and Nevada have all pursued similar efforts, and most of them have found themselves bogged down in elaborate legal fisticuffs for trying to apply laws generally written for different technologies and different eras to the modern streaming world.

Cable TV providers generally have a physical presence in the towns and cities they serve. Employees live in these areas, climb physical poles in these areas, and do tech support calls in these areas. By contrast, a company like Netflix may have little to no real physical presence in a town (outside of maybe some CDN hardware at an internet exchange point or regional ISP), so demanding they pay a tax under laws designed decades ago for different technologies often proves logically and legally unsound.

Netflix argued as much last January, making it clear the costs would be passed on to consumers:

“These cases falsely seek to treat streaming services as if they were cable and internet access providers, which they aren?t. They also threaten to place a tax on consumers that the legislature never intended, and we are confident that the courts will conclude that these cases are meritless.”

I suspect a lot of municipalities will continue to struggle to make progress here. Older franchise agreements and state laws in a lot of states exempt any service that doesn’t have significant local physical infrastructure. A mish mash of local court rulings means there’s not a whole lot of federal precedent on this stuff, but eventually this debate is going to wind its way to the Supreme Court, where the efforts could easily be swatted down by an over-arching federal ruling.

Filed Under: austin, franchise fees, netflix tax, streaming, taxes, texas
Companies: disney, hulu, netflix

Telecom, Broadcasters Convince FCC To Explore New Taxes On 'Big Tech'

Policy

from the this-probably-won't-go-well dept

Earlier this year, we noted how FCC Commissioner Brendan Carr had launched a bad faith effort suggesting that “big tech” gets a “free ride” on the internet, and should be forced to fund broadband expansion. Carr’s argument, that companies like Google and Netflix somehow get a free ride (they don’t) and should “pay their fair share,” is a fifteen year old AT&T lobbyist talking point. AT&T’s goal has always been to “double dip”; as in not only get paid for bandwidth by consumers and businesses, but to get an additional troll toll simply for, well, existing.

AT&T has long tried to offload its (often neglected or half-completed) network build and maintenance costs to somebody else to make investors happy. That somebody else is usually taxpayers, who’ve thrown billions in pointless tax breaks and dubious regulatory favors at the company in exchange for fiber networks that are always (so mysteriously!) left half completed and jobs that never arrive. Now AT&T (and their broadcaster allies) want tech giants to pay as well.

Over at the right wing Washington Examiner, you can see how this effort is framed in order to sell it to the public and regulators:

“The Federal Communications Commission is looking to hit Big Tech companies with new regulatory fees related to their high use of broadband facilitated by the agency ? a sign of Washington’s growing skepticism of Silicon Valley wealth and power.”

You’re given no indication that this is a telecom (AT&T) or broadcasting (the National Association of Broadcasters) bad faith political play. Carr (read: AT&T’s policy folks) had originally suggested in a carefully seeded editorial that tech companies should be forced to pay into the Universal Service Fund, which helps fund broadband expansion to schools and low-income communities. Now, Carr’s argument has also been piggybacked onto by broadcasters, who want tech companies to pay a tax simply to use unlicensed spectrum (like Wi-Fi hardware). Fortunately, the Examiner at least includes experts who point out the idea is stupid:

“Unlicensed spectrum was first established by the commission in 1985, and allows the general public to freely use, without a license, services such as Wi-Fi networks, Bluetooth waves, garage door openers, and other wireless technologies.

?The FCC is asking the public if we think fees on unlicensed spectrum is a good idea or not,? said Harold Feld, a telecom policy expert and lawyer at the consumer advocacy group Public Knowledge. ?And I?m here to say it?s a bad idea. In the spirit of Halloween, I plan to take a chainsaw to it.”

So I think the FCC is considering this route because it’s true the USF needs more money if we’re going to help make sure low-income kids and schools have decent connectivity. The problem is that the FCC’s proposal is written in such a way that it sounds like you could potentially be seeing annoying new taxes on Wi-Fi networks, Bluetooth devices, garage door openers, and more. The other problem is the core motivation here is by telecom and broadcast companies who simply want to offload their costs to somebody else. If they’re the ones writing the proposal (and it sounds like they are), the end product isn’t going to be particularly balanced or productive.

But to me the bigger problem is that if we’re genuinely interested in shoring up broadband funding and expanding access, we should first be targeting the billions upon billions in tax breaks, regulator favors, merger approvals, and other perks we give to telecom and broadcast giants (in Comcast and AT&T’s case one in the same) in exchange for jack shit. The idea that we waste billions by throwing it mindlessly at regional monopolies seems like a good place to start if you’re serious about reform. But please take a moment to notice that this idea never gets mentioned by folks like Carr. That’s fairly telling.

Nothing gets fixed in U.S. broadband (especially affordability and access issues) without addressing regional monopolization and the state and federal corruption that protects it. But not only do we not do that, if you watch regulators and lawmakers on both sides of the aisle, they can barely even candidly acknowledge it’s even a problem. As a baseline (and it has been the baseline for 30 straight years) that’s not a great recipe for success.

Filed Under: big tech, brendan carr, broadband, broadcasters, fcc, free ride, net neutrality, subsidies, taxes, telcos, universal service fund
Companies: at&t, facebook, google

Our Latest Techdirt Gear: I Paid More For This T-Shirt Than Trump Paid In Taxes

Techdirt

from the and-you-can! dept

We were working on some new Techdirt gear designs for our Techdirt Gear shop at Threadless (stay tuned!) when the NY Times dropped its bombshell of a story regarding President Donald Trump’s tax returns. As you likely know, despite every Presidential candidate in my lifetime releasing their tax returns, Trump has refused to do so (also, despite promises that he would). For years, reporters have sought out those taxes, and somehow the reporters at the Times got them. There were many interesting things highlighted in those tax returns, but a key point that has resonated widely: in the year Trump won the Presidency he only paid $750 in federal taxes (the same as he paid in many other years as well, including his first year as President in 2017).

Lots of people have been pointing out that this is crazy for all sorts of reasons, and plenty of people, including Joe Biden have jumped in with “I paid more in taxes than Donald Trump” gear. But, here at Techdirt, we believe in… going bigger. So we’re selling a “I Paid More For This T-Shirt Than Trump Paid In Taxes” t-shirt… for $751 (plus shipping).

This is a real shirt and you can really buy it. Whether or not it’s worth paying $751 for such a t-shirt is a decision that only you can make, though we’d be happy with that kind of support.

Of course, if that’s a bit too pricey for you, we do still have a lot of other more affordable gear you can pick up too, like our copyright takedown gear:

Or our 1st Emojiment gear that explains the 1st Amendment in emoji.

And many other designs and products (not just t-shirts, we’ve got face masks, mugs and notebooks among many other items as well). So shop around, and feel free to spend more supporting us than the President has spent supporting the United States of America.

Filed Under: donald trump, t-shirts, taxes, techdirt gear

Audit Indicates Intuit Made $1 Billion By Hiding Free File Program From The Public

Scams

from the dr-evil-shit dept

It’s been quite a long and frustrating walk for us in covering the lengths to which Intuit went to hide the free to file tax program. This is the program that it is legally mandated to offer. If you’re not caught up, the IRS struck a deal with the big tax prep companies out there, promising not to offer and expand its own free file programs, but only if companies like Intuit offer their own free file programs. Intuit did as instructed with its TurboTax product, except that the company then went about hiding the website for the free to file program from search engines and the internet, all while dropping the word “free” into as many places on the website for the paid services site it also runs. Then, because evil is an addictive drug, Intuit went ahead and lied to a bunch of customers to avoid refunding their money when it got caught in all this, informed its own employees that it bilked the public for their own good, and was even eventually found to have wrapped itself in the American flag while swindling active duty soldiers as well.

So, now you’re caught up. But perhaps you’re wondering why Intuit would risk all of the bad PR that comes with treating tax prep services like a game of three card monty. Well, the answer, according to a recent audit by the Treasury Inspector General, is because one-billion dollars.

More than 14 million taxpayers paid for tax prep software last year that they could have gotten for free, according to a scathing audit released Wednesday by the Treasury Inspector General for Tax Administration. That amounts to roughly a billion dollars in revenue for TurboTax maker Intuit, H&R Block and other tax software companies, according to a ProPublica analysis of tax prep fees.

The audit, which was launched following ProPublica’s reporting last year, explores why so few taxpayers use the Free File program, a public-private partnership between the IRS and companies such as Intuit and H&R Block. Among the reasons, the audit found: the confusing design and complexity of the program and persistently lax oversight by the IRS.

I suppose if Intuit was asked precisely how much its soul was worth, we now have our answer. And, yet, this is still all very stupid in the end. Because now, thanks to ProPublica’s reporting, the IRS has scrapped its moratorium on offering its own free to file program. So, by being so immensely greedy, Intuit turned what could have perhaps been a minor revenue generator instead into a combination of a PR shit sandwich and a competitor in the IRS. Well done?

But, in case you thought Intuit would finally be in a place where it recognizes its misdeeds and is ready to turn this PR boat around, nooooooope.

In a statement, an Intuit spokesman said the company “consistently and publicly supported recommendations and efforts to strengthen the [Free File] program as part of our commitment to free tax preparation and our mission to empower individual taxpayers to manage their finances and receive every dollar they earned and deserve.” He added that “the majority of eligible tax filers using DIY software filed for absolutely free through the Free File Program or using commercial products.”

Around 104 million taxpayers were eligible for Free File last year, according to the audit. Of those, just 2.4% actually used the free government program. Of the remaining 101.5 million, 67 million did not use tax software (most going to bricks-and-mortar tax prep services). The remaining 34.5 million used software to do their taxes, and of those, 14 million paid for tax prep they could have received for free.

So Intuit would rather play games in representing its numbers than simply admit to the truth. Not exactly the sort of thing you might want out of a tax prep service.

Filed Under: free file, irs, scams, taxes, treasury department, turbotax
Companies: intuit

Getting Better, Finally: Intuit's Shady Actions For Free File Program Lead To Change In IRS Deal

(Mis)Uses of Technology

from the free-as-in-taxes dept

Going through the history of our posts on Intuit and TurboTax will give you an incredibly frustrating recent history of Intuit’s bullshit actions regarding its free tax filing program for low-income households. This all stems from a deal the IRS cut with several major tax preparation companies, which amounted essentially to the IRS promising not to offer its own free file program so long as these companies, Intuit being the largest, provided free tax filing programs to the public themselves. The outcome of this naive deal cut by the IRS was to have companies like Intuit do everything possible to hide its free file sites from the public internet by delisting it from searches, then lying to customers to avoid refunding money when they complained that they could have filed for free, and finally Intuit similarly fooling veterans into paying for services that would otherwise be free all while wrapping itself in the American flag.

ProPublica did a bevy of fantastic reporting on all of this, leading to a fair amount of public outrage at how blatantly cynical Intuit behaved. It would be easy to be equally cynical in thinking that the IRS would simply sit and watch all this without taking any action. Perhaps to the surprise of many, however, it appears that the shining of the light on Intuit’s actions has led the IRS to significantly change the deal it struck with tax prep companies in a way that should be very, very positive for the public.

The IRS announced significant changes Monday to its deal with the tax prep software industry. Now companies are barred from hiding their free products from search engines such as Google, and a years-old prohibition on the IRS creating its own online filing system has been scrapped. The addendum also expressly bars the companies from “engaging in any practice” that would exclude their Free File offerings “from an organic internet search.” ProPublica reported in April that Intuit and H&R Block had added code to their Free File pages that hid them from Google and other search engines, diverting many users to the companies’ paid products.

“The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option,” IRS Commissioner Chuck Rettig said in a statement. The agency hopes the changes will make the free option more accessible for taxpayers in the 2020 filing season, he said.

It may seem a bit much to expect the IRS to flip the script and offer its own fleshed out free to file program to compete with private companies in the span of a year or so. Still, reading the quote above, it sure sounds like that’s the IRS’ plan. It’s something that absolutely should happen, as for most lower and middle income taxpayers, the IRS already has everything it needs to prepare simple tax returns. There is zero reason why anyone not filing a complicated return should pay any amount of dollars to Intuit instead of just verifying the information that the IRS needs to process a return.

It should be noted that the prohibition on the IRS offering its own free file program was the result of intense lobbying by the likes of Intuit. That makes it all the more funny to see how the company is pretending to react publicly to these changes.

In a blog post on the Intuit website, the company said, “Intuit strongly supports these changes to the Free File program and associated Free File offerings because they increase the focus on the taxpayer experience.”

That would be hilarious if it weren’t so infuriating. Intuit and its peers had every damned opportunity to make the taxpayer experience the focus of its own efforts. Instead, these companies took every measure to hide its free file programs and websites and to trick the taxpayer into paying for a service that was supposed to be free.

That is, if nothing else, certainly some kind of customer experience.

Filed Under: free file, irs, taxes
Companies: intuit

Getting Worse Part 3: TurboTax Wrapped Its Veterans Site In The American Flag And Then Tricked Soldiers Into Paying

Failures

from the usa!--usa!--usa! dept

One of the most irritating aspects of our politically polarized reality is how that polarization seeps into everything. An example of that can be seen in the ongoing coverage, here and otherwise, of the complete shitshow Intuit has found itself in over how it has handled its TurboTax free-to-file taxes system. With all the best reporting coming from ProPublica, the whole thing started by exposing Intuit purposefully hiding the free-to-file website as best it could despite its obligations to Congress, got worse when Intuit’s support reps lied to customers about that reporting, and then got worse still when internal communications to Intuit staff carried the theme that Intuit was hiding its actually free program, but did so for the public’s own good. The result of all of this is that many people who qualify to file for free instead paid Intuit tons of money to file their taxes, all because the non-free website — which was massively branded with the word “free” — told them they didn’t qualify.

But here’s where the polarization comes in. This story should have been met with outrage from across the political spectrum. Instead, probably because one side of the aisle has been pitching having the IRS do free-to-file itself, while the other side has been fear-mongering having a government agency do what it absolutely could be doing already, the outrage is about half of what it should be.

But if there is anything that gets applause across from both sides of the political aisle, it’s typically support of US military veterans and active service members. Well, hey, great news: Intuit was fucking them over too!

In patriotism-drenched promotions, press releases and tweets, TurboTax promotes special deals for military service members, promising to help them file their taxes online for free or at a discount.

Yet some service members who’ve filed by going to the TurboTax Military landing page told ProPublica they were charged as much as $150 — even though, under a deal with the government, service members making under $66,000 are supposed to be able to file on TurboTax for free.

It takes a special kind of cynicism for a company to wrap itself in the American flag while charging our fighting men and women for tax prep services that it is obligated to provide for free. And it sure looks like Intuit is doing this purposefully, again playing all the SEO games it played to keep free tax prep services away from active service members. The post follows one family, the Zimmermans, that ended up paying $60 for tax prep that would have been free on the free-to-file site that Intuit keeps hidden. Liz Zimmerman ended up in that boat because she googled “tax preparation military free” and got the non-free site.

But when Zimmerman got to the end of the process, TurboTax charged her $60, even though the family makes under the $66,000 income threshold to file for free. “I’ve got a kid in braces and I’ve got a kid in preschool; $60 is half a week’s worth of groceries,” she said. “Who needs date night this month? At least I filed my taxes.”

In the commercial version of TurboTax that includes the “military discount,” customers are charged based on the tax forms they file. The Zimmermans used a form to claim a retirement savings credit that TurboTax required a paid upgrade to file. If they’d started from the TurboTax Free File landing page instead of the military page, they would have been able to file for free.

So now can we all agree that something must be done to punish Intuit for this? Is Intuit’s line — that it’s hiding free services for the public good — going to be accepted when we’re talking about active duty members of the military? If you need this point driven home even more, get a load of the bullshit in Intuit’s own marketing material.

To find TurboTax’s Free File landing page, service members typically have to go through the IRS website. TurboTax Military, by contrast, is promoted on the company’s home page and elsewhere. Starting through the Military landing page directs many users to paid products even when they are eligible to get the same service for no cost using the Free File edition.

An Intuit press release this year announced “TurboTax Offers Free Filing for Military E1- E5” — but refers users to TurboTax Military and does not mention the actual Free File option. (E1-E5 refers to military pay grades.) It was promoted on the company’s Twitter feed with a smiling picture of a woman wearing fatigues outside her suburban home. Google searches for “TurboTax military,” “TurboTax for soldiers” and “TurboTax for troops” all produce top results sending users to the TurboTax Military page.

Intuit will tell you that the TurboTax Military site does in fact allow some service members to file for free. And that’s true, but the site also charges other service members for tax prep that would be totally free using Intuit’s actual free-to-file site found on the IRS website. ProPublica dug further to test this with volunteer service members.

We tested TurboTax Military and TurboTax Free File using the tax information of a Virginia-based Navy sailor and his graphic designer wife with a household income of $53,000.

The filing experiences had just one major difference: TurboTax Military tried to upgrade us or convince us to pay for side products six times. We declined those extras each time. Finally, the program told us we had to pay $159.98 to finish filing.

And that “military discount”? All of $5.

In the Free File version, by contrast, we were able to file completely free.

Come on, people. It can’t take a “Getting Worse Part 4” to get some real action on this beyond a couple of municipal and state investigations.

Filed Under: free file, taxes, turbotax, veterans
Companies: intuit

Getting Worse Part 2: Intuit's CEO Informs Employees That Free To File Was Hidden For The Public's Own Good

Failures

from the pro-public-uh... dept

Like we said, Intuit apparently wants to keep digging this hole for itself. After our initial coverage of ProPublica’s excellent posts on how Intuit was going to crazy lengths to keep anyone from finding its free to file tax prep site, we followed up with reports of how many Intuit reps were lying to keep from giving people refunds. Those lies included claims that Intuit and TurboTax don’t even run the free to file program and that it was instead operated by the IRS itself with TurboTax branding. Another lie was that ProPublica’s reporting was all wrong and that the news organization was about to run a retraction. Spoiler alert: no they are not.

But it seems that the Intuit brass aren’t content only to lie to the public. Intuit’s CEO managed to cobble together an internal video — which of course leaked — so that he could lie to his own staff as well.

Sasan Goodarzi, the CEO of Intuit, says the company’s efforts to make its free tax-filing software harder to find on Google were part of the software giant’s commitment to educating taxpayers. In an 11-minute video sent to Intuit employees, Goodarzi said the company was trying to help consumers by steering them to “educational content” instead of TurboTax’s free filing website.

Responding to our reporting, which shows that Intuit, H&R Block and other for-profit tax software companies were steering low-income customers to their paid products, Goodarzi said the company’s marketing practices “had been misinterpreted to signal that we were trying to hide the product we offer in the IRS program. That is inaccurate.”

That’s nonsense. Intuit’s decision to combine buying Google ads and de-indexing the free to file site via robot.txt file has only one reasonable motivation: to hide the free option and push people to the paid services. It’s also clear from the result of these actions, which is that 3% of taxpayers eligible to file for free did so, with 97% instead paying for services they didn’t need. That’s a whole lot of “educating” going on, all of which happens to result in gobs of money for Intuit.

We’ll put the entire video at the bottom of the post for your enjoyment, but there are a couple of sections we should highlight in text.

“Over the past five years, tens of millions of consumers filed their taxes for free using one of our free offerings. That is more than every tax prep company combined.”

If there are any hard statistics to back this statement up, Goodarzi doesn’t offer them. Neither did Intuit’s PR folks when ProPublica asked for them. The end result, whatever the actual hard numbers, is that 3% of eligible taxpayers used the free to file program. That number ain’t great.

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.

This takes a lot of stones. Suggesting that the average person searches the internet for “TurboTax free tax preparation” looking for not free tax prep by TurboTax takes the kind of full on blatant lying typically reserved for current American Presidents. And keep in mind that these poorly-spun lies are being told to internal Intuit employees. Why anyone would want to listen to this and continue to work there is beyond me.

And, amazingly, despite this vociferous defense of Intuit’s practices, the video culminates with Goodarzi stating that the company has ceased hiding the free to file site due to all of this “fake news” reporting.

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.

I doubt, frankly, that this will be enough to keep away the current lawsuits and the many, many more that I imagine are in the midst of being drafted. This has class action lawsuit written all over it.

And the more Intuit continues digging this hole, the worse it will get.

Filed Under: free file, free tax filings, sasan goodarzi, taxes, turbotax
Companies: intuit