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Republicans and Dems Come Together — to Keep IRS From Competing with TurboTax

A recently introduced bill would ban the IRS from offering free tax prep software.

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An employee of a Miami tax preparation office holds a sign before the Internal Revenue Service deadline. (Joe Raedle/Getty Images)

Last month, we detailed how Intuit, the maker of TurboTax, has fought a proposal that could make filing taxes easier and cheaper for millions of Americans.

As we noted, tax activist Grover Norquist and other conservatives have also opposed the proposal, called “return-free filing,” which would give many taxpayers the option to receive a pre-filled return that they could simply review, sign and send back, all for free. Return-free filing has been endorsed by many experts and adopted by several European countries.

As it turns out, Norquist has also recently weighed in on the side of the tax prep industry on another issue.

A House bill introduced earlier this year would bar the IRS from offering taxpayers software that would compete with programs like TurboTax. In March, Norquist and others wrote a letter to members of Congress that urged them to support the bill — what they called a “pro-taxpayer, anti-IRS power grab legislation.”

At issue is how Americans file their taxes and whether electronic filing can be offered directly through the IRS. 

The bill is called the Free File Program Act, co-sponsored by Rep. Peter Roskam, R-Ill. and Rep. Ron Kind, D-Wisc. It declares that the IRS, with a few narrow exceptions, “may not establish, develop, sponsor, acquire, or make available” electronic filing service or tax software.

Roskam declined to comment. Spokespeople for Kind and Norquist did not immediately respond.

The bill would also make permanent the Free File program, a public-private partnership between the IRS and the tax software industry created in 2002 to offer some taxpayers free electronic filing.

The industry group behind the program boasts that almost all taxpayers can use software like TurboTax or more primitive electronic forms for free. But access to the more sophisticated software is limited by income. Only about 3.5 million taxpayers used Free File last year, according to a Treasury Department tally through the end of April.

The pact governing the partnership, which counts Intuit as a member, includes a sweet deal for the industry: In return for the companies offering free software to some, the IRS agreed not to develop its own free, online tax prep services. The current deal expires next year.

ServiceReaders

After ProPublica published a story on how Intuit, the maker of TurboTax, has successfully fought "return-free filing," we asked readers how they did their federal income taxes, and how much they paid to prepare them.

Of the 596 responses, 44% of readers said they used TurboTax, with a median preparation fee of $50. Only 2% of respondents said they used FreeFileFillableForms.com, the free e-file service provided by the IRS. According to the treasury, 410,000 filers used Free Fillable Forms last year.

Intuit lobbied on an earlier version of Roskam’s bill that was introduced in 2011.

The company has spent over $11.5 million on lobbying on a range of issues in the past five years. That money buys high-profile help: Intuit’s lobbyists on the tax prep issue include former Sen. Tim Hutchinson, a Republican from Arkansas; former Rep. Pete Hoekstra, a Republican from Michigan and former Rep. Albert Wynn, a Democrat from Maryland. All three now work for the D.C. office of law firm Dickstein Shapiro. Neither the former lawmakers nor the law firm immediately responded to requests for comment. Intuit also did not respond to requests for comment.

Intuit has given money to the sponsors of the bill. Roskam has received $12,500 from Intuit’s political action committee and company executives in the last two election cycles. Kind has gotten $12,400.

Sen. Mark Pryor, D-Ark., introduced a companion bill in the Senate. Pryor received $3,000 from Intuit’s PAC in the last election cycle.

Another recent bill would actually institute a version of return-free filing, allowing many taxpayers to avoid paying for any prep.

On Friday, Rep. Bill Foster, D-Ill., introduced the bill to create a voluntary system under which an IRS website would offer individual taxpayers forms that are automatically populated with data from employers and other sources.

“Our tax code is complicated enough, we shouldn’t be asking taxpayers to submit information the IRS already has,” Foster said in a press release.

“Taxpayers spend an estimated 6.1 billion hours a year complying with the tax code and an average of over $200 on tax preparation fees,” according to the release. (More on those figures can be found in a 2012 report by the Taxpayer Advocate Service, an independent organization within the IRS.)

The bill is called the Autofill Act, and last week marks the second time Foster has introduced the legislation. A spokeswoman said Foster got interested in the issue after he became frustrated with the “redundant paperwork” needed to file his own taxes and discovered California had a state version of return-free filing.  She said he will now be working to collect cosponsors and the bill is likely to be referred to the Ways and Means Committee.

This doesn’t mean an anxiety-free tax season is coming soon: similar bills introduced in the past haven’t gone anywhere.

Excellent article. One comedian said we should require people in Congress to wear company logos on their jackets. The more they receive from a company the large the lofgo.  Here is a case in point. Everyone in Congress would look like NASCAR drivers.  Also, I undertand how retail tax software programs make money but how do the free online programs make money?  Are they selling the data collected?

Sunday March 14 went online to TurboTax for chat help.  Much abbreviated word-for-word chat follows:  “Welcome to Intuit! All agents are busy assisting other customers.  Your position in queue is 58.  Your estimated wait time is approximately 92 minutes….[two hours later] “18_Greg E has joined the conversation….Hey Anna! Thanks for contacting TurboTax technical support! I am very sorry about the long wait to reach me. My name is Greg and I’m here to help you today.

While I take a few moments to review your question, I’d like you to know that my goal today is to resolve your technical issue quickly and accurately. You may experience short periods of inactivity while I research the most appropriate resolution for you; please do not disconnect the chat until we have agreed that your issue is resolved.
Anna Sklar
I wouldn’t dream of it
18_Greg E
I see you’re wondering why it didn’t bring up a deduction on the loss from the fire correct?
Anna Sklar
I just need to know how to list the difference between what my insurance paid for fire damage and the actual damage.
I entered all the amounts requested and it just never registered. I must be doing something wrong.
18_Greg E
Which section are you entering it in Anna?
Anna Sklar
Other deductible expenses—the one that lists fire as a casualty
I listed fire in my home and that’s where things got weird
18_Greg E
Alright, that looks correct, and what comes up when you edit that?
Anna Sklar
Here’s the whole thing: household belongings; date of purchase [redacted]; amount of cost [redacted]. Amount reimbursed by insurance [redacted]. I enter and nothing comes up.  I don’t understand FMV before loss and FMV after loss. What should I be putting into in these two item lines?
Greg, are you still with me?
18_Greg E
That’s a great question Anna, and I know what we need to do to get it answered. I will bring in our absolute best for more help here from our FTA team. So hang tight, and we’ll get them connected, and answer all of the questions!
Anna Sklar
You’re scaring me here. You don’t know the answer and I’ve waited more than two hours.
18_Greg E
I’m only a tech support agent Anna, and I don’t want to guess and be wrong. That’s why we’re going to get our best on this, because they’re well versed with the tax code (former CPAs, and accountants)
I’d rather we get it right, instead of guessing and being wrong, and messing up your return!
Anna Sklar
so, how long am I going to have to wait?
18_Greg E
I’m not seeing a time on it here, but I’ll get them connected as fast as we can! Obviously it’s a crunch time for everyone so we want to get this answered as quickly as possible!
Anna Sklar
Oh, my. This is beginning to feel as if I’ve fallen down Alice in Wonderland’s rabbit hole and have met one of its denizens.
18_Greg E
That may have been the best reference I’ve ever heard :) Nothing to worry on Anna, we can get this done! Deep breath, and we’ll get you taken care of!!!
Anna Sklar thanks. :( ....
[And down the rabbit hole I went]
All agents are busy assisting other customers.
Your position in queue is 561.
Your estimated wait time is approximately 103 minutes.”

At which point I left the site, and the next morning up popped the devil “Your estimated wait time is approximately 22 minutes.
Error connecting to the server. Please wait while we try to reconnect…
Could not connect to any servers. Will retry in one minute. Could not connect to any servers. Will retry in one minute.
Your session has been disconnected. Please refresh the page and start a new chat.”

Russell Miller

April 15, 2013, 3:11 p.m.

Follow the money….  A secondary issue that should not be overlooked is if we want to go down a slippery slope where big brother tells us how much we owe and debits our accounts accordingly? Paying tax made easy.

In order to accomplish this you must have all of the numerical ingredients reported to the IRS.

Bocephus Johnson

April 15, 2013, 3:25 p.m.

LOL…. Anna: You waited until the day before the tax deadline to start filing taxes and then get upset that there’s long waits for customer support at the Turbo Tax website?!.... Do you Christmas shop on the night before Christmas and expect the stores to be empty and well-stocked too?

Russell, the proposal is consistently that you get a bill and either pay or dispute it, the same way that almost every organization in history has worked.  If you want to stupidly give them direct access to your bank account, that’s your business, but nobody has every suggested it be a requirement.

On the other hand, what’s the difference between seizing your money and forcing you through an audit and/or lawsuit for some minor glitch on your hand- or computer-filled form where you’ll be court-ordered to pay up?

Certainly, a bill for your approval is more transparent than the “guess a number” game we currently play, where you either calculate what they calculate or they garnish your wages and seize your assets.

Stephanie Palmer

April 15, 2013, 7 p.m.

I wouldn’t pay one dime to any of those companies, especially since the so called representatives of the people are just enhancing the bottom line of these companies at our expense. They can all go drop dead.  I also don’t use prescription medicines, not with big pharma already stealing enough of my tax money.  Fortunately I don’t get sick very often.

Oh, as to the headline, I think Congress is showing its hand on the “we can’t work together” scam.  They clearly can work together.  Case study #2:

chicagotribune.com/news/politics/sns-rt-us-usa-congress-securitybre93b0zj-20130412,0,6596065.story

So, abridging civil liberties, forcing Americans to pay for things that should be public, blowing up civilians overseas, and hiding the skeletons in their own closet, they can do without a debate.  Repeal the laws that give companies benefits for exporting jobs and doing everything they can to stamp out new technologies before they can improve our standards of living, well, that’s going to have to be a lengthy debate and they’ll have to scuttle the bill for lack of votes because the opposition is just so darned adversarial and irrational.

This is too disgusting to comment on.
It personifies crony capitalism.
We wonder why They hate us?

I just don’t understand it.  Congress makes the laws,  The IRS is responsible to act upon them, and collect the taxes.  Why in the world should I, as a taxpayer, pay individuals to do my taxes?  If the government wants the forms filled out, then they should assist us in filling them out.  Seems like an excellent system, to have them pop up with everything filled out.  They have my info.  They know how much I made.  They know how many dependents I have. Seems that congress here is turning us over to big business to make profits.  I used to do all my own taxes - when forms were available in post offices, libraries, etc.  They sent us, via mail, what we needed as well.  Today, they do not send booklets, and our PO and Library arent even given the forms to hand out.  One one hand, they seem to discourage us to file, and on the other hand, tell us we have to pay to have the forms done.  Not right, or fair to the taxpayer.

Why does smaller government always seem to involve a slower, less efficient one, even when it comes to things no sane person defies the government for doing?

I wonder (and plan to research) how often people fail to complete their taxes in a timely manner and how much it costs to hunt them down and correct it. TurboTax certainly doesn’t handle those kinds of issues so it seems like they’re allowing Intuit to profit while they also offload any actual hard, expensive work onto the government and thus the people. Of course tax companies are going to support that, that’s a win-win for them and absolutely no one else. It also adds an additional party to further complicate any problems that arise, or another point of failure, if you will.

Though they’re probably in on this too, I filed with H&R this year in spite of Intuit. Unfortunately, they tried to strong arm me into paying for a higher tier of filing by offering to “helpfully” fill in my data from last year. The data: my DOB and an old, incorrect street address; this is what they refused to do for me unless I paid them money.

Private filers are not helping anyone who makes as little money as I do, and it pisses me off when both the filing companies and our crooked “representatives” imply otherwise.

Scott Brackett

April 17, 2013, 8:10 p.m.

If the free program is good, how many members of Congress use it?  How many use Turbo Tax?  I’ll bet they would love $350 for their tax computation.

Nobody is forced to purchase a tax product, so don’t.  I’ve done it by hand, using the 1040 guide book, used a CPA and used Turbo Tax.  Unless the code is changed, Turbo Tax is a value that I choose to spend my money on.  If you think the IRS is going to maximize your refunds or deductions, feel free!  caveat emptor

Eliminate deductions and loop holes, leave filing to businesses.

Susan Winchester

April 18, 2013, 11:44 a.m.

As a tax accountant I use professional tax software that is produced by a subsidiary of Intuit. The cost has sky-rocketed. It now costs $48/individual return or $68/business return plus $7 for e-filing. That said, I do my own return by hand without a computer. Members of Congress should do the same. It provides a reminder of how complicated tax law is. It is outrageous that Congress has proposed a bill to prohibit IRS from providing return software to the public. Anyone who wants to prepare his own return should be able to do it without cost.

I would also suggest that anyone who has questions about their taxes look first at the IRS publications, which are usually pretty clear. My last choice would be software tech support.

@ Scott Brackett

“If you think the IRS is going to maximize your refunds or deductions, feel free!”

Well, if they get within $200 of my maximum, for free, I am still in the black.

Kris Nuttycombe

April 21, 2013, 6:08 p.m.

Sounds like it’s time for OSS tax filing software. I’d prefer to use an OSS tool to anything that *either* commercial software vendors *or* the IRS could ever put out, anyway. Are there any such projects?

Scott Shawcroft

April 24, 2013, 2:40 a.m.

I thought about trying to parse the IRS’s HTML and create Python out of it. Some of the worksheets are just too tedious. “Line X. The minimum of Line A and Line B”

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