POLITICS

The TurboTax Giveaway Is In Trouble

Mischief by tax prep companies is undermining an IRS reform bill.

WASHINGTON ― A bill that would block the Internal Revenue Service from setting up a free online tax-filing service faces an uncertain future in the Senate after sailing through the House last month.

Consumer advocates labeled one of the bill’s provisions a handout to the private tax preparation industry. Sen. Ron Wyden (D-Ore.), co-sponsor of the Senate version of the bill, said its critics were wrong, and it seemed like the legislation had a chance at landing on President Donald Trump’s desk.

But now Wyden appears to be having second thoughts.

“I’m talking to my colleagues at this point,” Wyden told reporters on Tuesday, avoiding any definitive statements about whether he still supported the bill as written.

People currently can’t file their taxes for free on IRS.gov. Instead, the agency lets tax preparation companies like H&R Block run its so-called “Free File” program. As a result, the companies trick people into paying for their software and less than 3 percent of taxpayers use the free service.

Intuit, the maker of TurboTax, even put code on its Free File website to keep the page out of Google search results, ProPublica reported Friday. The story was the latest in a series highlighting abusive practices by the tax prep industry. 

Wyden said that before Congress adjourned for its Easter recess, debate over the bill had been highly technical ― but the ProPublica story made it a lot simpler.

“That debate changed, in my view, dramatically in the stories that came out over the weekend,” Wyden said, adding that tax prep companies “were up to their dirty tricks again.”

The dirty tricks are getting the companies into actual trouble. On Wednesday, New York Gov. Andrew Cuomo (D) directed state agencies to investigate tax preparation companies “following recent reports that these companies allegedly used Google advertisement and website features to deceptively hide additional tax filing options from low-income individuals who are eligible to file their taxes for free,” Cuomo’s office said in a release.

Intuit said in a statement that Cuomo’s “characterizations are untrue and we look forward to sharing the facts with New York regulators.” In response to the ProPublica story, the company said it was “undertaking a thorough review” of its search practices. 

The Taxpayer First Act is supposed to improve IRS customer service and includes several provisions consumer advocates like, including a restriction on the government’s use of private debt collectors for tax debts. 

But the bill also directs the IRS to continue administering Free File with the help of the private sector. The language would codify an arrangement that, until now, had been based on memorandums of understanding between the government and a consortium of tax prep firms called the Free File Alliance.

Before the House approved the bill without even taking a roll call vote, progressive Democrats had begun to complain about the legislation ― but were persuaded not to object by the bill’s Democratic co-sponsor, civil rights icon Rep. John Lewis (D-Ga.).

Lewis told HuffPost that if the Senate wanted to change the bill and send it back to the House, that would be fine. “If something needs to be fixed, we will do it,” he said.

Senate Finance Committee chair Chuck Grassley (R-Iowa) wants to proceed with the legislation, but it’s not clear that Senate Majority Leader Mitch McConnell (R-Ky.) would bother putting it on the floor ― especially if it’s going to require extra fussing. A spokesman declined to say if McConnell would give the bill floor time.

“Given the Mitch McConnell legislative graveyard, who knows whether that’s even going to go forward,” Finance Committee member Sen. Sheldon Whitehouse (D-R.I.) said.

“I would certainly feel much more comfortable if that was not in the bill,” Sen. Ben Cardin (D-Md.) said. “It’s an important bill.”

Fixing the measure could be as simple as adding a line that says the legislation does not prohibit the IRS from running its own version of Free File on its website, according to Mandi Matlock, a tax attorney with the National Consumer Law Center. The NCLC opposed the Free File provision but not the overall bill.

But lawmakers should hesitate to pass the legislation without changes, she said, considering the New York state government’s investigation.

“While all these fires are burning I don’t think the Senate should rush to pass this bill,” Matlock said.

This story has been updated with a statement from Intuit.

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