Over the years we’ve introduced quotes into the Weekend Word when they’ve made sense, but I think it might be time to go in a different direction at least for this week. Around this time last year, I stumbled upon a joke and considering it is tax season I couldn’t think of a more apt time to share:
Government: You owe us money, it’s called taxes.
Me: How much do I owe?
Gov’t: You’ve got to figure that out.
Me: So, I just pay what I want?
Gov’t: Oh, no we know exactly how much you owe, but you have to figure it out.
Me: What if I get it wrong?
Gov’t: You go to prison.
Obviously, this is hyperbole, but it illustrates an interesting point; why is it on us to figure out and file our income tax? The short answer is, the IRS wasn’t able to, well until recently. At the end of December, the IRS announced an addendum to the 17-year-old Free File deal which among other things removed the restriction that the IRS couldn’t provide its own tax return software. I am getting ahead of myself, let’s back up a bit.
In 2003 the makers of TurboTax, Intuit and other tax preparation companies came together and negotiated a deal with the IRS. They would provide free federal filing to at least 60% of taxpayers. The condition? The IRS couldn’t compete with them. The deal looked like it was a hit, in just two short years after Free File’s creation over 5 million taxpayers took advantage of free filing. Alas that wasn’t enough for Intuit, in 2007 Intuit launched another free tax filing program called TurboTax “Free Edition”. What was the difference, well this one wasn’t free… well at least not most of the time.
TurboTax “Free Edition” was designed to lure in customers not only eligible for Free File, but any unsuspecting person who isn’t quite sure what they need. They used techniques called dark patterns to try and confuse then convince consumers they needed to use the “Free Edition” that would inevitably not be free. Dark patterns are shady practices that are designed to confuse or overcomplicate things so that consumers cannot achieve their desired goal. One such dastardly practice Intuit used was deploying code so they could hide their “Free File” webpage from search engines; you can’t use what you can’t find… It was a massive success. Intuit and others in the industry charged at least 14 million Americans for tax prep that should have been free.
Everything came to a head this year as Intuit and other industry giants leveraged there massive lobbying force and pushed forth legislation that would make it so the IRS could never offer their own tax filing service to compete with them. They almost got away with it too, if it just wasn’t for those meddling kids… by which I mean Justin Elliot and other supporting authors at ProPublica. Elliot and others at ProPublica have released a slew of articles detailing the underhanded actions taken by Intuit to keep their throne. It was their efforts that brought this topic into the public sphere and created enough backlash that multiple states have opened investigations. This even went as far as to force the IRS to amend the language in the Free File deal to prevent companies from deliberately hiding their Free File offerings and removes the language preventing the IRS from entering the space.
As it stands right now nothing has changed, we’re still solely responsible for filing our taxes despite the government already having our income. We can also expect Intuit to still be the leading tax preparer in the country, but they may want to look over their shoulder. They used every advantage handed to them by the government and ran with it to the tune of a 900% increase in their stock price since 2007. Along the way though they exploited the people they promised to help and angered the entity that could take it all away.