Turbo Tax refunds to go out to the people they defrauded

Some time ago, the government made a deal with private tax preparation companies that they would not create their own tax preparation software that people could use to file their taxes for free (which would be the logical thing to do) and, in return the private companies would provide free tax preparation software to low income groups. But what the invaluable investigative journalistic outfit ProPublica discovered was that the private companies buried access to the free software so that almost no one could find them and, in addition, used fraudulent means to make people think they needed more expensive packages than they actually required.

State governments sued them and as a result, refunds are being issued to those thus defrauded.

One year ago, all 50 states and the District of Columbia announced a $141 million settlement with Intuit, the maker of TurboTax. The investigation, led by New York Attorney General Letitia James, centered on how the company had steered customers into paying for tax preparation even though they qualified for a free government program. The attorney general said the probe was sparked by ProPublica’s reporting in 2019.

About 4.4 million low-income Americans will receive payments under the agreement. On Thursday, James announced that the process of actually mailing checks to all those people will begin next week.

“TurboTax’s predatory and deceptive marketing cheated millions of low-income Americans who were trying to fulfill their legal duties to file their taxes,” she said. “Today we are righting that wrong and putting money back into the pockets of hardworking taxpayers who should have never paid to file their taxes.”

As ProPublica documented in story after story, TurboTax for years lured consumers with the promise of “free” tax filing and then deployed a range of tricks and traps to steer them to paying products.

Meanwhile, Intuit has lobbied for decades to prevent the government from developing a free tax filing system. One result of that fight, 20 years ago, was the IRS Free File program: In exchange for the IRS agreeing not to develop a free filing system, the tax prep industry agreed to offer something similar. On paper, the program allowed 70% of taxpayers to file for free. But only a tiny percentage of people ever used Free File — in part because Intuit, H&R Block and others actively sought to prevent taxpayers from finding out about it while pushing their own “free” products.

After ProPublica’s articles in 2019, the situation shifted. The IRS and the tax prep companies dropped the provision that prevented the IRS from making its own free filing system. H&R Block and TurboTax dropped out of the Free File program. And the IRS is actively studying how a public free filing program might work.


I refused to use the private companies even though I could afford to because I knew they were running a scam. I created my own tax spreadsheet that I use each year to create the data for the various forms, transfer that data to the fillable forms provided by the IRS and state governments, and then print them out and send them through the mail. It is not that hard to do. I also am wary of giving my personal financial information to companies because you know that at some point they are likely to either abuse it or allow it to fall into the hands of crooks. Once the government creates its own tax preparation program, I will consider using it.


  1. sonofrojblake says

    Just another example of the most heavily armed public in the world bafflingly tolerating the sort of behaviour that would justify filling the perpetrators with holes.

    Good on ProPublica.

  2. Allison says

    I created my own tax spreadsheet that I use each year to create the data for the various forms, transfer that data to the fillable forms provided by the IRS and state governments, and then print them out and send them through the mail.

    Same here. And if your tax situation doesn’t change much from year to year, all you do is change the numbers in the spreadsheet and copy the output to the forms. I calculated my 2022 NY and US taxes in two or three hours; filling the forms took longer than updating the spreadsheet.

    At one point, when I was working as an independent contractor, we tried using a tax attorney to do our taxes. When I’d review the filled-out forms, I kept finding errors — things he left out, or handled incorrectly. We went through a number of iterations before I couldn’t find anything wrong any more. I decided it was easier to do it myself.

    Later, we tried using TurboTax. It was really painful. You have to do everying the TurboTax way, and some of the stuff we had to deal with didn’t fit into the TurboTax schema. I kept having to do overrides, which TurboTax handles really badly. It turned out to be easier to skip TurboTax entirely. (It also saved a lot of paper — TurboTax generates a large number of pages with no useful information.)

    I’ve had to do the self-employment stuff, I’ve had to handle multiple state income taxes, I’ve had to handle non-US income. It was still a heck of a lot easier to do it myself.

  3. rojmiller says

    The US tax filing system is very outdated. The forms are unfriendly -- I last filled out a US tax return in 1981 (I was a US resident alien for a couple of years), and the forms don’t look like they’ve changed a lot since then.

    I’m Canadian. Since 2006 I’ve used a software package developed in 2004 by an independent tax consulting firm. They offered it for free until a few years ago, now they charge $15 to file up to 10 returns.

    The software is wizard driven. The first time you use it the wizard guides you through entering all the necessary information. After that it retrieves all the information (including carry-overs) from your previous years info, and you just verify it (or make any necessary changes). Actual tax information is uploaded to the government by banks, investment firms etc., and you just download it through the software and verify it. You then submit your return electronically through the software, and then either pay what you owe directly through your bank’s e-transfer system, or receive your refund directly into your bank account, usually within 10 days.

    In some European countries the government basically fills out your return for you, and you just verify it -- Canada is now looking at going to that type of system.

    There is no reason tax filing should be complicated or difficult in 2023. Allison said “I calculated my 2022 NY and US taxes in two or three hours”. My return takes 15 minutes max, and then only because I have some investment cost numbers that I check and re-check.

  4. says

    Wanna scare some republicans? Start talking about using AI to audit tax filings. Actually, an AI would need to be coupled to an expert system that reflected changes in tax law. But imagine if 100% of tax returns were audited by a dispassionate, unbribeable system?

  5. says

    The tax preparers did not, alone, defraud the people. The government helped, by abrogating its responsibility to stop the citizens from being cheated by scammers. Doubtless the government’s deciding on that arrangement was political expediency in deference to capitalism (i.e: they did not do their job)

  6. Dunc says

    In some European countries the government basically fills out your return for you

    Yeah. As long as your affairs are relatively simple (as most people’s are) and the tax code isn’t too absurdly baroque, there really should be no need to do an annual tax return. Here in the UK, most people are on PAYE (Pay As You Earn) -- you give your NI number to your employer, they get your tax code from the government, they figure out how much tax you need to pay between them, and it comes directly off your wages. You only need to fill in a tax return if you have other sources of taxable income, earn over a rather high threshold, are a company director, or have some other unusual situation that needs to be taken into account.

    If you do need to complete a tax return, there’s quite a good online system. I did my first ever tax return last year (at the age of 49) and it was quite straightforward.

  7. says

    I’m assuming there must be stronger regulations in Canada because I’ve been using TurboTax online for years now and I’ve never had a problem finding the free service. Yes, there are times during the process where they will suggest paid upgrades, but it’s very easy saying no to those.

  8. GerrardOfTitanServer says

    What Dunc says.
    It’s an abomination that the tax preparation group has successfully lobbied the government to require their costly services for what should be provided for free by the government. The IRS is already in the business of collecting a bunch of data to verify the tax returns. There’s no reason for most people to file tax returns.

  9. John Morales says

    There’s no reason for most people to file tax returns.

    Rule of law, presumably. You like that a lot.

    what should be provided for free by the government

    It is, here in Oz.

  10. GerrardOfTitanServer says

    I can’t tell if you’re purposefully being an asshole or you’re just that unbelievably stupid. Probably both.

    I did nothing other than suggest that we change the law to make it better. I did not ask for judges to change how tax law works contrary to the law. Rule of law says nothing about changing the law through the proper process, or organizing to ask for changing the law through the proper process, or protesting for such changes, or voting for reps who will do such changes, etc., you fucking incompetent asshole.

    Die in a fire already.

  11. John Morales says

    Well, Gerrard, you wrote “There’s no reason for most people to file tax returns.”

    I certainly can think of good reasons to require most people to file tax returns, but it surely suffices to say that is the law. So, that is the reason, contrary to your claim.

    I did nothing other than suggest that we change the law to make it better.

    Better as in having fewer people file tax returns, presumably.

    Point is, as the OP makes distinctly clear, it is not the case that the government requires their costly services.

    In short, you are equivocating between needing to file a tax return and needing to use paid services from private companies.

    … you fucking incompetent asshole …

    Heh. If I am an incompetent asshole, it follows that I’m not good at being an asshole.

    (So, thanks. Not much of an asshole, hardly anyone pays me that compliment)

  12. Holms says

    Gerrard, the meaning of that sentence is obvious so long as it is taken with the rest of the comment, and even more so when taken in the context of this conversation. It is just John being deliberately obtuse for kicks.

  13. suttkus says

    I (US citizen) tried using TurboTax’s free tax service. I didn’t have any trouble finding it, the IRS site links directly to several free tax services. I’m an author, and I don’t have a W-2, but a form declaring the royalti8es I’ve earned during the year. TurboTax declared that my situation was way, way too complicated for their free service, and I’d have to sign up for the pay version! So I went back to the IRS site and tried a different one. One of them called FreeTaxUSA has been handling my tax filing ever since, for free.

    So, I didn’t lose any money to TurboTax, but I’m pleased to see them being sued here.

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