Several senators led by Elizabeth Warren, D-Mass., are calling for the Internal Revenue Service and the Federal Trade Commission to investigate five tax software companies’ efforts to hide their truly free filing options from search engines.
“Hiding Free File from the public clearly aligns with the financial interests of these companies, because taxpayers are more likely to encounter and use their fee-based services, which are easily found through search engines,” the letter says, citing ProPublica’s reporting on Intuit, the maker of TurboTax, and H&R Block.
“For the same reason, it has likely increased prices for low-income consumers who should have had access to Free File but were understandably unaware of the specific IRS website that may have led them there.”
Congressional staff found that the websites of three other companies that have signed on to the IRS Free File program — TaxSlayer, TaxHawk Inc.’s FreeTaxUSA and Drake Software’s 1040.com — had used similar code to hide their truly free offerings from Google and other search engines.
An H&R Block spokesperson said its “Free File program grew 8 percent this tax season, exceeding the Free File program growth of 6 percent, and we believe H&R Block is in full compliance with the Free File agreement.” Use of the Free File program as a whole has dropped sharply in the past decade. None of the other companies immediately responded to requests for comment.
The letter to the FTC is signed by 14 Democratic members of Congress, seven each from the House and Senate, including Sens. Cory Booker, of New Jersey; Bernie Sanders, of Vermont; and Ron Wyden, of Oregon. Signers from the House include Brad Sherman and Katie Hill, both of California, and Tim Ryan, of Ohio.
It asks the FTC to investigate whether the tax companies are engaging in unfair and deceptive practices. Noting that at least five companies used similar tactics, the letter also cites antitrust law banning “conspiracy in restraint of trade.”
The letter to IRS Commissioner Charles Rettig asks that the agency take action to remove the companies from the program and “ensure that tax preparation companies that charged Free File-eligible taxpayers to file their taxes refund fees.”
All five companies are part of the Free File Alliance, which signed a deal with the IRS to offer free preparation and filing service to many Americans. In exchange, the IRS has pledged not to develop its own service. The Senate is now considering a bill, passed in the House, that would codify the program, restricting the IRS from developing its own free service.
A May 1 letter written by 12 House Democrats took aim at a gift to the tax preparation industry that has been buried for years in bills that fund the federal government. Since 2015, appropriations bills have carried language that prevent the IRS from providing pre-filled tax returns to taxpayers. Many developed countries have such systems. The idea that the IRS could offer citizens pre-filled returns has been described by Intuit executives as an “existential threat” to the company.
The latest version of the language was included in the appropriations bill that followed the government shutdown this year and will be in effect through September.
In the May 1 letter, the authors, Rep. John Lewis, D-Ga., Rep. Alexandria Ocasio-Cortez, D-N.Y., and Hill among them, asked the leaders of the House subcommittee that funds the IRS to eliminate the language in the next appropriations bill. Rep. Mike Quigley, D-Ill., is chair of that subcommittee. The congressman’s office acknowledged receiving the letter and said he is currently reviewing it.
In a separate development, a civil lawsuit was filed against Intuit in California Superior Court on Wednesday alleging deceptive trade practices and accusing TurboTax of running a “bait and switch scheme.” The suit cites ProPublica’s stories. It was filed by the firm Gutride Safier, which specializes in consumer class actions.
A spokesman for Intuit said the company would not comment on pending litigation.