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.
Intuit and other tax software companies have spent millionslobbying to make sure that the IRS doesn’t offer its own tax preparation and filing service. In exchange, the companies have entered into an agreement with the IRS to offer a “Free File” product to most Americans — but good luck finding it.
Here’s what happened when we went looking.
Our first stop was Google. We searched for “irs free file taxes.”
And we thought we found what we were looking for: Ads from TurboTax and others directing us to free products.
The first link looked promising. It contained the word “free” five times! We clicked and were relieved to see that filing for free was guaranteed.
We started the process by creating the profile of a TaskRabbit house cleaner who took in $29,000. We entered extensive personal information. TurboTax asked us to click through more than a dozen questions and prompts about our finances.
After all of that, only then did we get the bad news: TurboTax revealed this wasn’t going to be free at all. Turns out the house cleaner didn’t qualify because he is a independent contractor. The charge? $119.99.
Then we tried with a second scenario. We went back to TurboTax.com and clicked on “FREE Guaranteed.” This time, we went through the process as a Walgreens cashier without health insurance, entering personal information and giving the company lots of sensitive data.
Again, TurboTax told us we had to pay — this time because there’s an extra form if you don’t have insurance. The charge? $59.99.
But wait. 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.
So how did we end up with a product that would make us pay?
We took a close look at the source code of the TurboTax website and noticed something strange. Even though we clicked on the “FREE Guaranteed” option and met all the requirements to file for free, the company had tagged us as a potential paying customer.
In the source code, TurboTax had branded us as “NONFFA.” That stands for “Non Free File Alliance.” In other words, we were not on track to file for free after all.
Here’s what it looks like behind the curtain:
Even though TurboTax could tell we were eligible to file for free, the company never told us about the truly free version.
It turns out that if you start the process from TurboTax.com, it’s impossible to find the truly free version. The company itself admits this.
This is a good time to remind you: Intuit, the maker of TurboTax, is one of the companies that has promised the IRS to offer free tax filing to lower-income Americans.
Is it called the Free Edition? No, that’s reserved for the widely advertised commercial products that are only free for people with the simplest taxes. The company calls the truly free version the Freedom Edition.
Once we realized that what we really wanted was TurboTax Freedom, we simply entered that into Google:
The first link was from TurboTax and said “Free File Program” right in the text. We clicked, and it brought us to this new page.
While the orange “See If You Qualify” link did take us to the real Free File program, the blue “Start for Free” link brought us back to the version of TurboTax where we ended up having to pay.
There’s a name for internet design tactics that get users to pay for products they don’t necessarily want: dark patterns.
Now, let’s go back to our original Google search.
The fifth link, a government site, looked like it would take us to the actual Free File program.
But not so fast! When we clicked, and then clicked through to a second page, we found a whole new set of choices and restrictions. Each of the 12 companies that have signed on to the deal with the IRS offer their own Free File product. But they all have different requirements based on age, income and location.
Finally! We clicked the “TurboTax Free File Program” link and found the actual homepage for TurboTax Freedom.
It’s not exactly a secret that this Free File program isn’t working well. The national taxpayer advocate recently said it “is failing to achieve its objectives and should be substantially improved or eliminated.” The IRS has been criticized for failing to oversee the program and the number of people using Free File has dropped by millions since it peaked in 2005.
Consumer groups have long argued that the IRS should offer its own free, online tax preparation and filing, as many other countries do.
But Congress is now moving to put the Free File program into law, including its restriction on the IRS creating its own free service. We wrote about that earlier this month and the opposition to this provision by freshman Democratic Reps. Katie Hill, Katie Porter, Alexandria Ocasio-Cortez and others. The House ultimately passed the bipartisan Taxpayer First Act, which also contains some provisions that consumer advocates support, such as restrictions on private debt collection of unpaid taxes.
Now the Senate is considering the bill. Its sponsors have argued that it doesn’t tie the IRS’ hands, but outside legal experts we’ve spoken to disagree. The text in the bill codifying the Free File program has long been sought by lobbyists for Intuit.
We asked TurboTax spokesman Rick Heineman why the company doesn’t automatically direct eligible taxpayers to the Free File product. He didn’t respond, but said in a statement that “TurboTax Free Edition is a free commercial tax preparation product that costs $0 for fed, $0 for state, $0 to file so 50 million users with ‘simple’ filings can file for absolutely no cost. Details for eligibility for this and other TurboTax products are stated on the Products & Pricing page.”
Heineman also directed us to Intuit’s annual corporate social responsibility report, which said that last year it “donated 2.3 million federal and state returns ($27 million in value) to lower-income taxpayers through the IRS and state Free File programs.”
Last year, Intuit’s consumer division, which includes TurboTax, reported $1.6 billion in operating income.
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