"Don’t confuse Freedom Edition with Free Edition at TurboTax.com"
June 18, 2018 10:14 AM   Subscribe

Why Are Millions Paying Online Tax Preparation Fees When They Don’t Need To? Few taxpayers use the Free File system — intended to help moderate- and low-income filers — and that benefits companies like Intuit and H&R Block. Now Congress is moving to make the program permanent. (SLProPublica by Tik Root)
posted by crazy with stars (22 comments total) 18 users marked this as a favorite
It might be my reading comprehension, but I'm unclear about whether this only affects federal returns, or if it's both state and federal (that seems to be the difference between the Free Edition and the Freedom Edition, but I don't know what the law compels). I've seen lots of companies that offer Free (federal) Filing! and then charge $30 for the state return.

Also, I laughed out loud at the part where they're like "but the government could hurt our revenue streams!" Like no shit, that's the point.
posted by shapes that haunt the dusk at 10:25 AM on June 18, 2018 [5 favorites]

USAA supposedly gives me a paid upgrade version of TurboTax for free but for 4 years in a row it doesn't work, they try to charge me 40 bucks or whatever, and I start over without whatever minor crap they hold hostage to auto input. Then they have this phony animation system that wastes your time and makes it seem like the calculations aren't instant. There's more math done in the animation code than in the tax form!
posted by GoblinHoney at 10:25 AM on June 18, 2018 [18 favorites]

H&R Block pushes the paid options pretty insistently, though not to the point of, say, AVG obnoxiousness. I was lucky because I have a close relative who is an accountant, and told me and my sibling about the free filing. (My mother, alas, still goes to an actual tax return preparer because she is very uncomfortable with technology.)

Just to make sure I have understood: the crux of this "return free" vs "free file" issue is whether the IRS itself is the one to provide the online filing service?
It might be my reading comprehension, but I'm unclear about whether this only affects federal returns, or if it's both state and federal (that seems to be the difference between the Free Edition and the Freedom Edition, but I don't know what the law compels). I've seen lots of companies that offer Free (federal) Filing! and then charge $30 for the state return.
Yes, H&R Block among them. However, it seems like in the last year or two, they waived the state return fee as well, and I'm not sure what motivated the switch. Prior to that, I would print out the tax forms from the state government agency's website and fill them out by hand....
posted by inconstant at 10:26 AM on June 18, 2018

*looks at the $600 he paid to the CPA last year*
posted by Definitely Not Sean Spicer at 10:32 AM on June 18, 2018

"Return free" is the IRS preparing it for you. They say, "hey according to our records, this is your tax return. If this is correct, pay X or we pay you Y (as applicable). If not, please amend and return."

The IRS generally has all the info you're providing to them already. It's ridiculous that work is duplicated, and that we're paying for 3rd parties to help us when the IRS could be doing it.

It's also appalling that the Free File Association thinks they're doing "philanthropic work" when it's in fact a duty they must do in exchange for a promise to not compete. It's not philanthropy, it's their legal duty!
posted by explosion at 10:34 AM on June 18, 2018 [29 favorites]

The US Tax Industry previously on mefi:

Paying Intuit to calculate a number that the government has already calculated and is keeping secret is preposterous. Just give us Return-Free filing! Getting states to go along with return free will be even harder, but if the IRS offered it, maybe they'd accelerate plans.

I hate these businesses with a fury, but don't know how to remove them from the process. As long as people are afraid of the IRS, they will be able to market their necessity.
I still print and mail my returns b/c the IRS doesn't allow direct e-file submissions. You have to use a third party, many of whom are shady AF. I have screwed up simple things on 2 or 3 returns over the last decade, and I always get a polite letter explaining what they found and why my refund was changed (even sending me a check when the error was in their favor). If you aren't trying to defraud them, they are not a scary organization. I wish Congress would allow them to research/develop better ways to do their job. There are probably a ton of people there who want to build a better, cheaper system but are legally prohibited.
posted by stobor at 10:49 AM on June 18, 2018 [11 favorites]

Yeah, I didn't click on the links in the article, but it sounds like part of the agreement the government made with those companies prevented the creation of a cheaper alternative. My school was offering a free tax prep clinic, but I didn't do it because I thought I could file for free. Didn't read the fine print, paid $30 instead.
posted by shapes that haunt the dusk at 11:02 AM on June 18, 2018

Isn't Free File Fillable Forms direct e-file with the IRS? There's certainly no indication on the IRS website that it's run by a third party.
posted by vibratory manner of working at 11:03 AM on June 18, 2018 [1 favorite]

Explosion, you have it backwards. The IRS has promised not to compete, in return for having a free feature-limited product for both state and federal tax returns.

My own anecdotal experience - we started working on taxes wayyyy too late, and went with the free filing to avoid having to go through what we assumed would be a lengthy purchase and download and input process. The result? I spent six hours gathering the same materials in our file drawer and trying to add them to the online forms. I'm an MBA graduate and about pulled my hair out trying to understand the error messages I received. 15 minutes before the deadline, I owe $2000 after deducting all our student loan interest. Several errors with trying to zero out the tally sheet, I finally get it to go through. We get a success message on the page.

The next day, we receive an email saying that there were errors with our submission and that we have to resubmit. In the meantime, my wife has downloaded the free TurboTax and resubmitted the same materials. Now we have a $500 refund. I'm not an outlier, if anything I'm heading towards the mainstream with recent moves toward graduate student debt and HSA account management.

If there's anything to be angry about, it's that the IRS can't get its act together to make a product that actually helps average people navigate the very complex tax ecosystem. What did they expect would happen when they relied on tax software companies to make something for them? And not to relitigate, but there are millions of hours lost by each household every year - we know simpler code can reduce those hours and build more equity into the system - why not, for the good of our middle class economy?
posted by SoundInhabitant at 11:12 AM on June 18, 2018

Free File Fillable Forms isn't part of the IRS since the IRS is banned from doing that. It's run by the Free File Alliance. I was curious and ran a WHOIS check on their domain (freefilefillableforms.com) and found their nameservers are set as:
which made me laugh a bit. (It's also a total grift and incredible how they've been able to get the federal government and states to make it so much harder and more expensive to file taxes than it should be (and was! in some states).)

I always either use paper forms or the freeableable forms and never a paid prodoct as a small (and pointless) protest since I'm able to.
posted by skynxnex at 11:14 AM on June 18, 2018 [3 favorites]

SoundInhabitant, the "return free" that explosion was explaining is Senator Warren's new proposal, not the current scheme.

It is a bit confusing terminology!
posted by inconstant at 11:18 AM on June 18, 2018

From what I remember from previous coverage, the status quo is maintained by a funny alliance of the tax prep companies and people like Grover Norquist who really hate taxes.

Some of them are basically convinced that having the IRS generate returns is basically a trick to get people to claim fewer deductions, since people would just accept what the IRS generates as good enough and wouldn't bother to add in their charitable donations and medical expenses and such.

A cynic could argue they also benefit politically if people associate taxes with a stressful, expensive chore instead of tapping a couple of boxes on your phone and getting a quick refund in your bank account.
posted by smelendez at 11:19 AM on June 18, 2018 [2 favorites]

It's important to note that it's not only the tax prep companies, deliberately sabotaging this, it's also conservative Republicans like Grover Norquist who want paying taxes to be as unpleasant as possible for ideological reasons. They killed an autofile initiative in California -- an initiative with a 98% satisfaction rate amongst users! -- a few years ago.

Here in Canada, the list of certified software is broken into free and not-free; the free software has always worked well for me. The auto-fill service has been in place for three years and works great. Taxes take me less than an hour to file start to finish, and I have what is considered a complex tax return. About 30% of Canadians file their own taxes this way; the rate is higher for higher income bands, and for "simple" rather than "complex" returns.
posted by Homeboy Trouble at 11:29 AM on June 18, 2018 [9 favorites]

The fact that the IRS and the state-level revenue services strongly encourage e-filing (bordering on actively discouraging paper filing) while simultaneously not having a direct e-file service, meaning that anyone filing their taxes is being encouraged to go through a private third party, is obscene.

For three years in a row about a decade ago, I attempted to e-file my taxes, only to discover that every single free file system I tried was unable to handle my taxes, because my income was as a graduate student stipend reported on a 1099 rather than a W-2. There was literally no way for me to correctly report my taxes using the free file systems I could find. So in each case after spending a couple of hours trying unsuccessfully to e-file, I bit the bullet and filed paper forms, taking about 30 minutes to do everything each time. And in each of those cases, either the IRS or my state revenue service managed to screw up something based on an error transcribing what I wrote into their computer system.

For one year I got a letter informing me that I'd under-reported my tax owed by a factor of 100, and still needed to pay essentially all of my original tax owed, plus a late payment penalty. Turns out they'd dropped the last two digits from what I reported as my tax owed, and sent the letter despite having received all of the correct amount. That took a week of phone calls to resolve, but I didn't end up having to pay the penalty. Another year there was the opposite problem, and they sent me an "overpayment" refund for essentially the entire amount of my tax paid because they again erroneously dropped a few digits from something. I don't know what would have happened if I'd just cashed the check and moved on with my life, but I called them to report the error. After a few weeks of them dealing with it, I received a letter informing that the problem had been corrected, but I now owed them $10 for "late payment" -- because they'd incorrectly sent my money back to me. I decided that not having to deal with any further hassle from them was worth at least $10 to me so I just paid it instead of fighting.

I don't remember whether I first discovered Free Fillable Forms, or if my income finally switched to being paid on a W-2, but since I've been able to e-file I haven't had any of these problems. So I'm very pro-e-file. But all of the free-file services from big-name tax prep agencies still end up taking me 3-5 times longer to use than just doing Free Fillable Forms.

Free Fillable Forms is probably the best option out there for anyone who's finances aren't too complex, is comfortable following instructions, and has no problem doing a little arithmetic. It should be the bare minimum service offered directly by the IRS for e-filing, but instead it's a private service. Of course it would not be very hard for the IRS to offer a more sophisticated computer system for e-filing that would make life easier for people with any attentional or cognitive difficulties that make following instructions on a form and/or doing arithmetic difficult. Frankly that should be the minimum in order to comply with the ADA. The fact that these large tax prep companies have managed to effectively insert themselves into the process of filing taxes without really providing any benefit that the government couldn't provide just as easily is disgusting.
posted by biogeo at 12:08 PM on June 18, 2018 [7 favorites]

I am pretty happy with TaxAct.com. Fast, simple and easy (although I do pay a $17 premium each year to keep last years stuff on file.)
posted by Samizdata at 12:39 PM on June 18, 2018

I've used TaxSlayer the last few years as it's typically a bit cheaper than the other online options. My time and sanity are worth $40 a year paid into a corrupt system.
posted by COD at 12:40 PM on June 18, 2018

I've used OLT.com for the last decade. My taxes are pretty simple, and it's worked just fine. I pay $9.95 for state* returns and the Fed one is free.

posted by aspersioncast at 1:43 PM on June 18, 2018

Another sneaky thing I've noticed in TurboTax is they offer to take their fee out of your refund, but in the fine print there's a note that if you choose that option there's an additional charge. And it's not small, it's like an extra $30 or something.
posted by dnash at 2:17 PM on June 18, 2018 [2 favorites]

I'd just like to point out in my particular corner of the third world, Chile, filing your taxes, if you're a regular person, is as complex as clicking 'send' on the tax services mobile app. Takes maybe 15 seconds, if you're super careful and actually glance at how much money you owe/are owed. Less if you just wing it.
posted by signal at 2:42 PM on June 18, 2018 [6 favorites]

I used Free File FIllable Forms this year and it corrupted some of my forms, which was not apparent until after I submitted them. I've spent at least 6 hours sorting it out with the IRS and I thought I had it solved but today I just received a cheque the IRS assured me I wasn't going to receive so I guess it's back to the phone tomorrow ¯\_(ツ)_/¯
posted by airmail at 5:52 PM on June 18, 2018

Here in Australia we now have MyTax, provided free of charge to the end user by the Australian Taxation Office, and it works well.

It replaces their earlier eTax application that used to need downloading and installing every year and whose designers, like those of approximately every finance-related desktop application ever written, had apparently gone out of their way to ignore every convention provided by operating systems to make installation and ongoing operation easy or tidy or secure.

I've used MyTax to do my returns since it first became available in 2016, and I have no complaints about it other than those related to the hamfisted implementation of the MyGov single sign-on authentication system it relies on. Saves me huge amounts of time that would otherwise be wasted on copying information from one spot to another by hand.

The US makes all of this harder (as it appears to do with virtually every facet of public administration) by requiring state as well as federal tax returns for the general citizenry; Australian States have not levied their own individual income taxes since World War II.
posted by flabdablet at 10:27 PM on June 18, 2018

It's shit like this that makes me not just a social democrat, but has pushed me into full-on anti-capitalism. Rent seekers everywhere. Why do we let these people walk around in our society acting like they're just trying to get by like the rest of us? Where is their solidarity? And where is ours that we allow them to get away with it?
posted by turntraitor at 8:52 AM on June 19, 2018

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