Most taxpayers don’t think about their taxes year-round.
You think about them when tax season rolls around, but once you’ve filed in March or April, you put those thoughts aside until next year. Well, except for the occasional receipt or tax document organizing.
But for some reason, 2019 has been different. In fact, taxes have stayed relevant long after Tax Day to an extent one would probably never anticipate.
But the question is why. Why has the tax return filing process reentered the national discussion? Sadly, the answer rests in headlines like this from the past month:
Well, that’s not good.
TurboTax and H&R Block have found themselves at the center of a giant scandal that involves allegedly tricking their customers into paying for tax filing services that should be legally offered to them for free.
This is a big deal for a lot of reasons, and it’s gotten quite a bit of coverage on the evening news and in major digital media outlets—so it’s unlikely you’ve missed the news by now.
But you may still be missing some details. What exactly did the company behind TurboTax, Intuit, do? Did H&R Block do something different? Who was impacted?
If you’ve used tax prep software like that of TurboTax or H&R Block to file your taxes in the past couple of years, you probably have one fundamental question:
What’s going on with TurboTax and H&R Block?
We’re here to walk you through these stories and give you the context you need. We’ll go over what happened, who it happened to, and what you should look out for in the future!
In April, a few reports by media outlets began alleging that two of the largest tax preparation software companies, TurboTax and H&R Block, were using a range of methods to divert their customers away from their free filing software and toward their paid services.
This is a big deal—and here’s why.
Filling out your tax forms by hand and mailing them into the IRS is relatively inexpensive.
However, filing that way is much more time consuming and rife with error—which is why using a tax preparation service or software can be so useful. In 2019, it makes a lot more sense to let a piece of software or a professional do the heavy lifting when it comes to all the calculations and deductions.
The IRS doesn’t want filing your taxes via software to be a financial burden for low-income taxpayers, so it signed a deal with H&R Block and Intuit. The IRS agreed not to create its own free online filing system, while H&R Block and Intuit pledged to “help tens of millions of Americans file taxes for free.”
For those taxpayers who meet the income requirements, the IRS lists options on its site for them to file for free using these programs. This Free File partnership has led a relatively peaceful existence for the past sixteen years.
Unfortunately, H&R Block and Intuit may not have been keeping up their end of the bargain.
According to documents and recorded phone calls, the companies are alleged to have intentionally hid the free option from customers, steering them toward paid products, instead. (These emails and recordings can be found here.)
Free filing software is, in a sense, a competitive threat to paid filing software. So, these companies found ways to convert free customers (who qualified for Free File software) into paid customers: hiding free file pages from search engines, directing sales teams to guide callers toward paid services, and designing pages to minimize presence of the Free File option.
Of course, we don’t know if you fell victim to some of these strategies. And we have to be extra clear: These are merely allegations right now!
However, if you paid for H&R Block or TurboTax and you thought you were getting the free option at first, you may have been guided away from Free File.
So, what should you do now?
First off, don’t blame yourself. If a company did take action to hide its Free File options from you, then it did a good job at it. It’s understandable you may have ended up paying!
Taxes are complex enough, and so is tax software—even when it makes the tax filing process a lot easier overall.
The best thing you can do now is to organize your paperwork. Unsure if you used one of those services? Double-check! If you meant to use the Free File software but paid, did you speak with someone on the phone? Or did you email the company?
Ultimately, you just want to follow up to see if anything in this situation potentially applies to you. If it doesn’t, you can move along happily with your life! If you leave your research suspecting it does apply to you, you’ll at least have organized your records of your interactions with TurboTax or H&R Block. In the instance a regulator or group opens up a case down the line, it’ll make things a lot easier for you to get involved.
This issue probably won’t get resolved quickly, but it’s sure to have an impact.
Now that you have a better picture of what’s going on with H&R Block and TurboTax, you can move forward with confidence. Maybe it means picking another service entirely! There are plenty of free filing options out there, as well as affordable paid software and tax prep services. Should you choose to use H&R Block, or TurboTax, make sure to confirm you’re using the Free File option.
Whatever tax preparation service (or program) you use should be completely on your team. Anything else doesn’t deserve your time.