The TurboTax ‘free’ tax software rip-off

According to the deal that the IRS has with the private tax preparation companies, the IRS will not develop its own free software provided that the companies offer free software to people earning less than $66,000 per year. Congress is now about to pass a measure making that agreement an actual law. But Justin Elliot and Lucas Waldron at ProPublica tried to file free and found that TurboTax has made it incredibly difficult for people to even locate the free service.

Did you know that if you make less than $66,000 a year, you can prepare and file your taxes for free?

No? That’s no accident. Companies that make tax preparation software, like Intuit, the maker of TurboTax, would rather you didn’t know.

In fact, if you start from the site, you can never get to the free software.

But that’s not all. TurboTax then further trips people up by including conditions that disqualify people from free filing, though these conditions were not supposed to be part of the deal. Filers suddenly find themselves faced with a bill. Elliot and Waldron created profiles of a house cleaner who earns $29,000 a year and a Walgreens cashier but TurboTax demanded that both of them upgrade to paid versions, using conditions to disqualify them from free filing (the former for being an independent contractor and the latter because of lack of health insurance) that they should not have been able to.

Are the house cleaner and the cashier not allowed to prepare and file their taxes for free because of their particular tax situations? No! According to the agreement between the IRS and the companies, anyone who makes less than $66,000 can prepare and file their taxes for free.

Is it any wonder that the use of the ‘free’ software has actually declined by millions from its peak in 2005? Elliott asked TurboTax spokesman Rick Heineman why eligible people were not immediately directed to the free software site rather than having it buried and but he did not respond.

These companies are unscrupulous exploiters of poor people. They probably feel that after having gone through the process of filing thinking it was free, most people would think that they are genuinely prohibited from the free service and will pay the bill they are presented with.

It is blatant bait-and-switch. And now these unethical companies are going be rewarded by Congress by having their shady practices protected by law.


  1. jrkrideau says

    Do these companies dabble in pay-day loans as well? How else will the the house cleaner and the cashier be able to afford the software?

    now these unethical companies are going be rewarded by Congress by having their shady practices protected by law
    Busness as usual?

  2. Ice Swimmer says

    It’s possible to have a tax system in which you don’t need any tax preparation software unless you are an entrepreneur. Of course, that would get some middlemen out of business and they would have to produce something useful instead of screwing over people.

    Here the local version of IRS gets most of the tax deductions correct (including tax deductions for trade union membership fees) without asking the taxpayer, the about only thing one has to file for is the deductions for home improvement, commuting or second home/lodgings necessary because of working far away from home. They send the pre-completed tax returns in April and you get refunded or pay back taxes in August.

  3. invivoMark says

    I am confused.

    For as long as I have been paying taxes I have been filing them for free. I have used various online services, and every one of them has been completely clear that I can file for free. Moreover, the IRS website offers a list of links to free filing services, and not one of them has tried to trick me into believing that I had to pay.

    So why the heck do people use TurboTax if they are so obviously deceitful? And why don’t they look on the IRS website to learn about free filing options?

    I know, I know, most people aren’t as vigilant as I am about these things, but I still feel like the bar is pretty low here.

  4. Marshall says

    The reason is because TurboTax’s software is just so easy to use. I used it because it kept all of my records from previous years and auto-filled in everything automatically. I barely had to touch anything except to do a few clicks--for me, that’s worth $20 or so to do my taxes in 10 minutes. Obviously I went over the final report with a close eye, but everything looked in order so I submitted.

  5. suttkus says

    I used TurboTax because it was the name I recognized. It was easy to find, but I went through the IRS website, which helpfully lists free tax software.

    This year, it didn’t go well. I’m now a full-time author, so I don’t have a w-2. After filling in all the forms, TurboTax declared my case wasn’t handled by their free software, and I could drop $60 to buy their full version. That’s $55 more than I had to spend, so stuff them.

    I went back to the nice IRS list, found a different free online tax software, and had no trouble filing. TurboTax then started sending me endless emails (until April 15th) in increasingly panicked tones about how I needed to finish filing right away! Bye-bye, TurboTax. You tried to extort me for more money, so you lost the money you would have gotten.

  6. says

    Surely the Government must publish the tax system API, in order to enable people to write their own tax submission software? (Cyber-self sufficiency is a real thing …..) How are people who use only Open Source software supposed to manage? (Some people are banned from running Microsoft Windows, for instance.)

    Even software that costs £0 may not be “free”, unless it is supplied with the Source Code under an Open Source license which permits users to study, share and adapt the code.

  7. Dunc says

    Digging this up as I’ve just learned of a couple of new wrinkles that may be of interest… According to UK IT news site The Register, it turns out that both Intuit and H&R Block have been active preventing search engines from indexing their free filing options, whilst using SEO techniques to drive people looking for free filing towards their paid-for products: Ok Google, please ignore this free tax filing code so we can keep on screwing America.

    The article also includes the remarkable statistic that “despite around 70 per cent of Americans being eligible to use the free products, just three per cent of them actually do.”

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