Hiring former regulators and politicians as lobbyists and apologists is common in Washington. But Sen. Elizabeth Warren (D-MA) says Intuit has taken influence-peddling to new lows with the tactics it uses to defend its TurboTax product's "bogus" advertising for free tax filing.
Warren's comments follow a Federal Trade Commission (FTC) complaint against Intuit for allegedly deceiving millions of taxpayers through the Free File program. Warren also skewered the company for hiring former FTC Commissioner Jon Liebowitz as an outside counsel.
The complaint charges that Intuit misleads consumers into believing that they can file their taxes for free with TurboTax.
"In fact, most tax filers can’t use the company’s 'free' service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income," the FTC said. "In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product."
“Intuit has gotten away with these Free File scams thanks to extensive lobbying and adroit influence-peddling – including repeated use of revolving door hires," Warren said in a letter to Intuit. She said Intuit’s lobbying program topped $3.2 million in 2021, focusing on opposing automatic filing that would expand free tax preparation services and putting up roadblocks for any proposed consumer protections.
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
As detailed in the complaint, Intuit engaged in a years-long marketing campaign centered on the promise of “free” services. These ads have run during major events, including the Super Bowl, and have also aired during this year’s NCAA Basketball Tournament.
In at least one ad a disclaimer appeared on the screen while an announcer said “That’s right, TurboTax Free is free. Free, free free free.”
But in spite of the ad's promises, many consumers who took the time to gather their documents, entrust their personal information to Intuit, and begin the filing process found that they could not file their taxes for free.
Warren said that years of reports have shown that Intuit profits off of vulnerable Americans and uses the revolving door to deploy lobbyists and influence-peddlers to shield its shady practices from government action.
Free File a "failure"
In 2003, Intuit and other financial services companies lobbied the Internal Revenue Service (IRS) to create the Free File program, which would provide free tax preparation services to low-and middle-income taxpayers through these private companies. But Warren said the program has been a failure.
"It was supposed to cover 70% of American taxpayers, but as of 2018, only 3% of taxpayers participated. This severe underutilization of Free File was driven by deceptive practices and sabotage from Free File companies – Intuit deliberately hid Free File from Google results, repeatedly changed names and landing pages to confuse and deceive consumers, and targeted military service members, people with disabilities, unemployed Americans, and people with student loans with upselling scams," Warren's letter said.
While Intuit left the Free File program in 2021, the IRS has not set up a government-run alternative, leaving consumers to search for free and low-cost solutions.
Consumer advocates have argued for years that the IRS already has basic wage information and could automatically calculate returns for millions of Americans but instead forces them to fill out forms that baffle and confuse many Americans.
Warren and other lawmakers have advocated tax filing simplification reforms, and have also introduced legislation – the Tax Filing and Simplification Act – to "close the revolving door that protects corporate scams like Free File.”
The legislation would protect taxpayers from corporate profiteering by directing the IRS to create simplified tax filing tools, a truly free replacement to the Free File Program, and give millions of taxpayers the option to avoid tax preparation entirely by providing them with a pre-filed tax return.