How the Makers of TurboTax Are Trying to Keep Doing Your Taxes Annoying

The company has long lobbied against a simplified, free tax-filing process that could take as little as 15 minutes.

An advertising sign for TurboTax software is seen on display in a Best Buy store March 23, 2006 in Niles, Illinois.
National Journal
Emma Roller
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Emma Roller
April 15, 2014, 10:47 a.m.

Ima­gine a world where, in­stead of hav­ing to manu­ally fill out the same boxes on your tax forms every year, the IRS filled out your pa­per­work for you in ad­vance and told you how much they think you owe, us­ing in­form­a­tion the IRS already gets from banks and em­ploy­ers. If you agreed with their es­tim­ate, you could just sign the pa­per­work and re­turn it. If you dis­agreed with their es­tim­ate, you could file your taxes the way you have been do­ing.

Sounds like a pretty good deal, right?

Not for the makers of Tur­bo­Tax, the on­line tax-pre­par­a­tion soft­ware that mil­lions of Amer­ic­ans use to file their taxes every year. In­tu­it, the com­pany that owns Tur­bo­Tax, has lob­bied hard to pre­vent auto­mat­ic tax fil­ing from be­com­ing a real­ity.

On Monday, ProP­ub­lica fol­lowed up on its re­port from last year about In­tu­it’s at­tempts to sty­mie re­turn-free tax-fil­ing le­gis­la­tion. ProP­ub­lica found that, in the past five years, In­tu­it has spent $11.5 mil­lion lob­by­ing against re­turn-free fil­ing at the fed­er­al level.

The com­pany has fought re­turn-free fil­ing at the state level as well. Back in 2009, Cali­for­nia was work­ing to im­ple­ment ReadyRe­turn, a state pro­gram that helps low-in­come tax­pay­ers file their taxes for free. In­tu­it fe­ro­ciously lob­bied against the pro­gram, and donated $1 mil­lion to a group fight­ing the elec­tion of state Comp­troller John Chi­ang, who helped put the pro­gram in place.

In­tu­it says the IRS would ex­ploit a re­turn-free fil­ing sys­tem to va­cu­um up as much rev­en­ue from tax­pay­ers as pos­sible.

“Re­turn Free min­im­izes the tax­pay­ers’ voice and in­stead max­im­izes rev­en­ue col­lec­tion for gov­ern­ment,” Ju­lie Miller, an In­tu­it rep­res­ent­at­ive, told Na­tion­al Journ­al. “That kind of an­ti­con­sumer policy does not ad­vance tax­pay­er rights, cit­izen em­power­ment, or real sim­pli­fic­a­tion of the tax code.”

But it isn’t just the IRS that has a ves­ted in­terest in con­trolling how Amer­ic­ans pay their taxes. More than 24 mil­lion people used Tur­bo­Tax to file their taxes in 2012, and the pro­gram ac­coun­ted for 35 per­cent of In­tu­it’s $4.2 bil­lion in rev­en­ue that year.

As Jordan Weiss­man at Slate notes, there is a more reas­on­able ar­gu­ment for not ad­opt­ing a re­turn-free fil­ing sys­tem: The sys­tem would be less con­veni­ent for Amer­ic­ans with com­plex taxes, or for small busi­nesses who need to give payroll in­form­a­tion to the IRS to help out their em­ploy­ees. But as many as 44 per­cent of tax­pay­ers would have an easi­er time fil­ing their taxes, ac­cord­ing to the Treas­ury De­part­ment.

Re­pub­lic­ans would prob­ably agree with In­tu­it that the IRS is not the best ar­bit­er of how much money people owe the gov­ern­ment. They have little trust for the IRS since the agency was ac­cused of tar­get­ing tea-party groups for audits. A sys­tem like re­turn-free fil­ing, which hands more power to the IRS, would cause a polit­ic­al ruck­us. And as long as fil­ing your taxes re­mains a frus­trat­ing, overly com­plex pro­cess, an­ti­tax con­ser­vat­ives like Grover Nor­quist will con­tin­ue to have a polit­ic­al punch­ing bag.

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