Why TurboTax tried to make your taxes more complicated
If you've ever stared anxiously at a pile of receipts and your W-2, you probably view TurboTax as a godsend. ProPublica, however, reports that TurboTax's parent company, Intuit, has spent $11.5 million lobbying over the past five years to ensure that the task of filing taxes remains a hair-pulling drag.
Intuit's efforts concern what's called "return-free filing," a process that's already in place in Denmark, Sweden, and Spain:
Imagine filing your income taxes in five minutes — and for free. You'd open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done. The miserable annual IRS shuffle, gone. [ProPublica]
For those worried that return-free filing screams of an encroaching Big Brother, Austan Goolsbee, former chairman of President Obama's Council of Economic Advisers, tells ProPublica that people would have a choice whether to do their taxes this way. "If you don't trust the government, you don't have to do it," he says.
Intuit has defended its lobbying efforts — which include joining "a STOP IRS TAKEOVER campaign" — in a lengthy statement, saying that "like many other companies, Intuit actively participates in the political process." Intuit argues that return-free filing is "a massive expansion of the U.S. government through a big government program," reminding critics that it instead supports Free File, a partnership between the IRS and online tax preparers, which allows low- and middle-income Americans to file their taxes online for free. TurboTax's parent company isn't alone in its opposition to return-free filing. ProPublica's story also names conservative tax reform advocate Grover Norquist and TurboTax competitor H&R Block as critics of the newfangled procedure.
Intuit says that taxpayers deserve to "keep more of their hard-earned money" by doing their taxes themselves or with the help of a program like TurboTax. But, as New York's Kevin Roose points out, most people file simple returns with information the IRS already has:
According to most studies, roughly 40 percent of all taxpayers do not itemize on their tax returns and take only the standard deductions they're allowed. That means that their returns consist only of their W-2 wage statements, plus any interest and supplemental income they've earned — all information that is already given to the IRS by employers and banks. [New York]
For those people, there wouldn't be much of a downside to return-free filing. Saving time and the $34.99 it costs for the basic federal TurboTax product could be very appealing to people who were going to file simple tax returns anyway.
As for the cost to the government and fears of an intrusive IRS, Sam Byford of The Verge says that "critics of the company's lobbying point out that the IRS wouldn't be doing much — if any — extra work under a returns-free system, and that taxpayers would always have the option of filling out their returns the old way if they disagreed with the government's assessment."
According to ProPublica, "TurboTax products and services made up 35 percent of Intuit's $4.2 billion in total revenues last year," which could explain why the company spent more money in the past five years on federal lobbying than did either Apple or Amazon.
California, with its ReadyReturn system, is the only state with return-free filing. Everyone else: Get your papers in order. Tax day, April 15, is fast approaching.