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Podcast: Is Intuit Making It Harder to Do Your Taxes?

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(Shannon Stapleton / Reuters)

Last year, roughly 25 million Americans used Intuit's best-selling software, TurboTax, to file their federal tax returns, accounting for 35 percent of the company's $4.2 billion in revenue.

With such high profit margins at stake, it comes as no surprise that Intuit would be opposed to free, simple tax returns — already a reality in much of Europe — which could save taxpayers a collective $2 billion and 225 million hours in prep costs and time. The company has spent $11.5 million over the past five years to lobby against return-free filing, claiming that having the IRS as both the collector and preparer of one's taxes is a conflict of interest.

ProPublica's Liz Day sat down with Editor-in-Chief Steve Engelberg to discuss how she came across her investigation; how return-free filing would make tax returns as simple as paying a credit card; and how readers have reacted to her story.

This podcast is available on iTunes and Stitcher. You can also read Liz's investigation, How the Maker of TurboTax Fought Free, Simple Tax Filing, and share how you're filing your taxes this year on our Get Involved page where we'll be charting the results.

Richard Schmidt

April 1, 2013, 3:07 p.m.

I have used TurboTax for years now and have always found it to be intuitive, easy to use and relatively problem-free. If the federal Government AND the state governments would devise a simple taxation system (no deductions, progressive tax rates as gross income rises) then I would join in the clamor to have free tax-payment systems. Until then, I like TurboTax.

I suppose one should not be surprised by the fact that the software companies join everyone else in the lobbying business, but somehow it is very disappointing. Ah well I suppose I shall just have to stop using Turbo Tax but unfortunately I have become dependent so it will have to be postponed till next year.

Marvin Van Horn

April 1, 2013, 3:14 p.m.

What is making it harder and more risky to do your own taxes, especially for Americans (U.S. Persons) living abroad, is the unique nature of U.S. Citizenship taxation, which is complexity on steroids that even Inuit can not deal with.

No other country in the world, except Eritrea do this. None!

Additionally, with FATCA (passed in 2010 and never reported on by Propublica) now being rolled out around the globe to create a Global Tax Data base, the risk of penalties for benign failures to report income while living abroad has gone way way up.

If you don’t understand FATCA and what is happening with the collecting of data on all U.S. persons residing round the world, (and the security risks it presents when your ITN is in 3rd party hands) you really ought to do some investigation.  And don’t just go to the usual characters or so called expert or ex-IRS attorneys who have a vested interest in the programs.

The U.S. Tax Code Complexity is the biggest problem, not Intuit, although like all of those in the Compliance Complex, there is a lot of money to be made by keeping it very complex and difficult to file correctly.

Michele Zimmerman

April 1, 2013, 3:15 p.m.

I am a tax accountant of 28 years; the business is dying because the only people who do NOT do their own taxes are rich old people and digiots who can’t work a computer. I started to get out of tax preparation about 3 years ago. Of course Intuit is fighting this: between ProSeries (which we tax pros use) and Turbotax, this IS their business.Intuit allready made accountants useless with their “any fool could do it” software QuickBooks, which makes anyone think they are a bookkeeper. This is not different.
I think the entire tax Code should be simplified, but too many CPAs and EAs make a mint doing returns.

John V. Lesko

April 1, 2013, 3:24 p.m.

This is just one more of a hundred examples of how the root of most of our social problems and public policy log jams have, at their origin, lobby money—lobby money AFTER the elections when elected officials secretly “shape and shift” their official positions away from their constituent’s wishes and toward where they think the lobby cash is for the next election—in this case, Intuit.  If all of the activist organizations, from Tea Party to Occupy; from environmentalists to libertarians; left wingers and right wingers, would make this issue their priority in the same way that the women’s movement and gay rights organizations did to achieve great success for their cause, we could have public funding of elections that would actually save tax dollars by ridding ourselves of our evil tax system and other wasteful government spending!  Professor Lawrence Lessig of Harvard gave us the research and the facts, now it is up to us to get our respective activist organizations to act on this one cause!

Fred Powledge

April 1, 2013, 3:26 p.m.

I got fed up with Intuit several years ago and moved to Block. Block has its own crazy-making moments, but I’ve run across nothing as bad as Intuit’s money-grubbing efforts, including its annual sabotaging of previous versions of Quicken.—Fred Powledge

as many are aware in the USA INC. it is profits before people or convience

I agree completely with Richard Schmidt.

Chuck Gerhards

April 1, 2013, 4:33 p.m.

I’ve done my own tax reporting for over 60 years, except for one year, which the tax preparer screwed up. For 2012 I tried to use IRS Free Forms, but there is a glitch in Schedule E, which in my case took a negative number and made it positive on Form 1040. Oh well, I just did the old paper file as usual. Still waiting for my return. I filed early, too.

The way I learn about tax deductions or credits that are available for me and others, and is by preparing my own taxes.  With this information I can better assess financial decisions in future years and better understand the implications of actions taken by Congress.

Without a simpler tax code, having the IRS calculate my taxes due would not interest me.

That being said, it would be nice if every law passed by Congress were put to a test of “who wins” and “who loses”.

Redistribution of the Weath over US$ 100 million of First 2000 International super wealthy and then, of 200 wealthiest local businessmen of any land-piece can change the world of hard working global folks.
A new UN power financed and managed by North-American leadership /public can make it happen in reality.

We prefer to use an overpriced, grey-haired local accountant who’s slow to respond as we prefer to support local business.

Plus these last few years of complication & newly weds, we prefer the option to discuss & ask questions plus have him run scenarios of what is advantageous for out tax situation.

Our, rather.

I’ve used Turbo Tax too and find it more time consuming than filling out the regular paper tax form, which I have been doing myself for the past 50 years. After having my return checked by a professional tax-preparer, it could not be improved upon, so I stick with the old-fashioned method.  Unless there are complications, I believe that everyone should be able to prepare their own form.

Ann has a good point.  Walking oneself through each and every step is informative and, for me, at least, confidence building.  It’s good to actually know how it all works and if one ever has to answer to an audit, be solidly able to explain.

Tax-Act is another program. Just as good as Turbo and cheaper.

Myself, up until seeing the lobbying against a better tax system (I’m still weighing what to do about it, on my end), I’ve been a mostly-happy TurboTax customer.

Interestingly, my one complaint with them has been that I still need to gather all my information and plug in numbers, even though it clearly has access to all the information.

If they blocked the better system and then built it, I’d be relatively happy giving them my money.  But the fact that they block the better system and keep it out of reach, that has to be grounds for some sort of anti-competitive practice suit.  Especially when there’s a serious “sunk cost” effect that it’s easier to pay them to carry over information from last year’s return than to start fresh with someone new.

But I’m guessing it’s not a coincidence that the same process that adds random tax breaks for companies (but, oh, never human beings…that would be stupid) also locks people out of offloading the work of doing their taxes.  Maybe we should all start hiring lobbyists.

Replace the corrupt middleman (politician-corporate complex) and give us direct democracy—- crowdsourcing our path to public policy would better reflect the will of the people.  We must voice our preferences every day instead of ceding our power to the select few we have entrusted with the “authority” to represent us.

I did my taxes yesterday with TT.  It took me less than two hours and was probably the easiest itemized return I’ve ever done.  Good job Intuit!

Turbo Tax costs $40 a year for relatively simple returns plus about $40 per state tax return, but states have auto-calculate programs and e-filing at no additional cost beyond general fund allocations to the state’s respective department of revenue. 

The real questions are:  (1) how much would it cost per taxpayer for auto-calculate federal program versus the $40 Turbo Tax charges; and (2) how much does it cost per taxpayer per state for the auto-fill forms versus the $40 Turbo Tax charges to do a state filing.

To each her/his own. Perhaps our situation is more complicated than a simple or itemized return. We understand the forms very well, we are Americans after all. However, I like to sit go over every line with a human expert who makes it their sole business to advise and prepare taxes.
Not to mention we support a local business in the process.

If the dryer circuit in my house shorted and blew out the breaker and melted a bus bar in the process, I believe I understand home wiring enough to replace the load center and then re-drywall the whole mess. Though I’m not college anymore and prefer to hire a professional handle it.

I got clipped once doing 14mph over the speeding limit. I thought I understood the law well enough to get out of it myself. Then I thought better of it and hired a local attorney. She made it disappear on technicality I never even heard of. Her fee was less than paying the fine. My legal idea would have had it hanging over my head for a year, risking a double-whammy if I happened to get another ticket. Which is exactly what the system is betting and built on.

Sure, DYI using a big corporation’s tax vice. Or pay a little more for a local professional who does it for a living, day in day out. Sure they use software as well, but you’re really paying for their expertise. SW to them is just a small tool in the box. Not to mention THEY represent you in case of an audit. Though using a professional, the odds of an audit are less (pewresearch.org), unless you use Wesley Snipes’ tax guy.

So this author doesn’t even know the difference between revenue and profit.  Even a high school newspaper editor would have questioned Minhee Cho on how this was concluded - “With such high profit margins at stake, it comes as no surprise that Intuit would be opposed to free, simple tax returns.” since nothing that supports it was presented.

As a tax-preparing CPA, I am intrigued (but not threatened) by the idea of “return-free filing”. I agree that a tremendous amount of time and effort could be saved if the IRS compiled the income and deduction information reported to them and gave this to taxpayers.

One obvious downside to this is that tax returns *and thus tax refunds for a majority of Americans* would be delayed by months, while this information was reported to the IRS. W-2s are not required to be reported to the IRS until February 28. And some items of income (from partnerships, S corporations, trusts, estates, etc) are not reported to the IRS and taxpayers until September 15. In order to know that all income is included in the IRS-provided forms, under the current system, the IRS would need to wait until late-September to provide this information. The delay of tax refunds is one glaring issue you left out of your piece.

Also, I want to point out some issues I have with the piece:
- The people who “have one set of income and aren’t itemizing your deductions” should be currently spending minimal time and effort on their returns. Your claim is absolutely absurd that these people would save $2 billion and 225 million hours per year!!! That might be the size of the entire tax preparation business - but a vast majority of these dollars and hours are spent helping my types of clients (large and complex individual tax returns).
- “What Intuit does is just help you electronically file your taxes” is incorrect
- Technically, it would not be “return-free filing” if the IRS sends you a “pre-prepared return” for you to either use or discard…

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