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TurboTax Maker Intuit Opts Out of IRS Free File Program (2)

July 16, 2021, 3:21 PMUpdated: July 16, 2021, 8:26 PM

Intuit Inc., the maker of TurboTax, is leaving an IRS program that offers millions of Americans the ability to file their taxes for free.

For years the federal government has partnered with a cohort of private companies on the Free File program, which makes free online tax preparation and electronic filing services available to individuals who make $72,000 or less a year. The departure of Intuit marks a second major tax preparation company to leave the alliance: H&R Block exited in 2020.

Intuit, which participated in the program for nearly 20 years, said online this week it is leaving the program. The program’s limitations and demands from “those outside the program” means the company can’t continue to participate and “deliver all of the benefits that can help consumers make more money, save more, and invest for the future,” a blog post announcing the decision said.

“I think it doesn’t bode well for Free File in the long run,” said Jeff Trinca, vice president of Van Scoyoc Associates in Washington and legislative counsel for the National Association of Enrolled Agents.

“Both of them make wonderful software, and the government is basically saying ‘You’ve got to give it away for free and these are our rules,’” he said. “At some point, if you give too much of it away, then you’re not going to make a profit and it’s easier to step out.”

The Free File program has drawn scrutiny in recent years, following a ProPublica investigation into companies, including Intuit and H&R Block, that hid free-filing options and steered customers toward paid products.

Other Options?

Amid pushback from lawmakers such as Sen. Elizabeth Warren (D-Mass.), the IRS commissioned a review of the program and added new protections for taxpayers.

“The IRS should not rely on giant companies that rip off taxpayers for essential filing services,” Warren said in a tweet Friday. Warren has previously introduced a bill (S. 1194) that would require the IRS to create a free online tax preparation service.

Carl Davis, director of research at the Institute on Taxation and Economic Policy, said he supports such an idea. The shift would mean the IRS could work directly with taxpayers, rather than “putting our faith” in corporations, he said.

Intuit’s Plan

Tim Hugo, executive director of the Free File Alliance, said in a statement that the alliance appreciated the work Intuit has done as part of the program. The IRS didn’t return a request for comment.

Intuit will officially leave the Free File program at the end of the filing season in October.

“We can help more customers get access to their refund faster at no cost, to tap into expert resources at will, to choose to use their own data to better budget, save and invest – all of which we cannot effectively do as part of the Free File program,” Intuit said.

(Updates with additional comment starting in ninth paragraph. Previous revision added reporting throughout. )

To contact the reporter on this story: Isabelle Sarraf at isarraf@bloombergindustry.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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