It’s tax season again, and that means you’re probably thinking about using TurboTax. You wouldn’t be alone; Intuit, the company that sells TurboTax, claimed in 2016 that the app has 31 million users. Its competitors did pretty well for themselves too, with H&R Block preparing more than 23 million returns last cycle and millions more using TaxAct and TaxSlayer.
Let me be blunt: You should not pay for TurboTax. If you want to use a free version of TurboTax or H&R Block at Home or Credit Karma Tax or TaxAct, go nuts. But for the love of God, don’t give Intuit money.
TurboTax is an evil, parasitic product that exists entirely because taxes are confusing and hard to file. Worse than that, Intuit is one of the loudest voices on Capitol Hill arguing against measures that make it easier to pay taxes. Years ago, the Obama administration proposed a system of automatic tax filing, in which the IRS uses income information it already has to fill out your tax return for you. That would save millions of Americans considerable time and energy every year, but the idea has gone nowhere. The main reason? Lobbying from Intuit and H&R Block.
Don’t give Intuit money. Don’t give H&R Block money. To do so is to perpetuate the status quo in which you have to file your own taxes in the first place. The best way to escape this trap is for millions of taxpayers to start doing their own taxes in hopes of weakening Intuit and H&R Block and depriving them of money they could use to lobby against auto-filing. This requires privileging your own long-term interests ahead of your short-term ones; it’s mildly annoying to do your taxes by hand for now, but in the long run, if the plan works, you won’t have to do your own taxes at all.
Why the government should just do your taxes for you
The actual work of doing your taxes mostly involves rifling through various IRS forms you get in the mail. There are W-2s listing your wages, 1099s showing miscellaneous income like from one-off gigs, etc. To fill out your 1040, you gather all these together and copy the numbers in them onto the 1040 form. The main advantage of TurboTax is that it can import these forms automatically and spare you this step.
But here’s the thing about the forms: The IRS gets them too. When Vox Media sent me a W-2 telling me how much it paid me in 2017, it also sent an identical one to the IRS. When my bank sent me a 1099 telling me how much interest I earned on my savings account in 2017, it also sent one to the IRS. If I’m not itemizing deductions (like 70 percent of taxpayers), the IRS has all the information it needs to calculate my taxes, send me a filled-out return, and let me either send it in or do my taxes by hand if I prefer.
This isn’t a purely hypothetical proposal. Countries like Denmark, Sweden, Estonia, Chile, and Spain already offer “pre-populated returns” to their citizens. The United Kingdom, Germany, and Japan have exact enough tax withholding procedures that most people don’t have to file income tax returns at all, whether pre-populated or not. California has a voluntary return-free filing program called ReadyReturn for its income taxes.
And there are serious plans for adopting this idea nationwide. Austan Goolsbee, former chief economist for the Obama administration, designed a proposal called “The Simple Return” in 2006 that would provide pre-populated returns for everyone not itemizing their deductions. You could even conceivably extend it to many itemizers; mortgage lenders already send out 1098 tax forms listing interest paid over the year, and the IRS could mandate that charities do the same for tax-exempt contributions.
The Obama administration supported return-free filing, and Ronald Reagan touted the idea in a 1985 speech:
We envision a system where more than half of us would not even have to fill out a return. We call it the return-free system, and it would be totally voluntary. If you decided to participate, you would automatically receive your refund or a letter explaining any additional tax you owe. Should you disagree with this figure, you would be free to fill out your taxes using the regular form. We believe most Americans would go from the long form or the short form to no form.
The proposal would be particularly good for low-income Americans eligible for the earned income and child tax credits, which are both refundable and offer substantial benefits to low-income taxpayers who file. But because you have to file, compliance isn’t perfect. Twenty percent of people eligible for the EITC don’t get it, and a big fraction of returns contain errors, usually because of the complexity of the credit and due to errors by commercial tax preparers. Automatic filing would provide EITC payments to many of that 20 percent not getting them, and would spare taxpayers from doing complex calculations that sometimes lead to errors.
The unholy alliance of Big Tax Prep and anti-tax conservatives
So why hasn’t return-free filing happened yet? The short answer is lobbying, and in particular lobbying by companies like Intuit. In 2013, ProPublica’s Liz Day wrote an incredible exposé on just how hard Intuit has lobbied to stop return-free filing from becoming a reality:
[In 2007] a bill to limit return-free filing was introduced by a pair of unlikely allies: Reps. Eric Cantor, R-Va., the conservative House majority leader, and Zoe Lofgren, D-Calif., a liberal stalwart whose district includes Silicon Valley.
Intuit’s political committee and employees have contributed to both. Cantor and his leadership PAC have received $26,100 in the past five years from the company’s PAC and employees. In the last two years, the Intuit PAC and employees donated $26,000 to Lofgren.
…In 2005, California launched a pilot program called ReadyReturn. As it fought against the program over the next five years, Intuit spent more than $3 million on overall lobbying and political campaigns in the state, according to Dennis J. Ventry Jr., a professor at UC Davis School of Law who specializes in tax policy and legal ethics.
They haven’t stopped; in 2014, Day reported that Intuit was involved with an astroturfing effort meant to manufacture the appearance of grassroots opposition to automatic filing. Intuit spent $13 million lobbying Congress from 2011 to 2015, with 41 lobbying reports relating to taxes in 2015 alone. Most of the reports reference lobbying to “enhance voluntary compliance” — a euphemism for opposing automatic filing.
In this, Intuit and other tax prep companies had a powerful ally: Grover Norquist. The anti-tax crusader vehemently opposes automatic filing on the grounds that it makes tax season insufficiently nightmarish, which might reduce people’s aversion to taxes and make it easier for politicians to pass tax increases. So even though Ronald Reagan himself supported automatic filing, Norquist has helped make the idea dirt in the eyes of conservative legislators.
The solution: Boycott TurboTax
So what’s a regular person hoping for return-free filing to do? Well, you could do what Joseph Bankman, the Stanford Law professor who helped design California’s system, did and spend $30,000 out of pocket to hire a lobbyist to push the idea and counter Intuit’s lobbying.
But for those of us without $30k to spare for the greater good, there’s a less demanding option: Stop paying for TurboTax.
Now, if you have a relatively simple return without itemizations, I’m not going to argue that you shouldn’t use TurboTax for free. It, like most tax software, includes a free option for simple returns, or for households making under $62,000 a year. Using that is totally fine, as is using Free File Fillable Forms, a program offered by the tax prep companies in conjunction with the IRS that has a computerized version of the basic 1040 form. As long as you’re not giving any of your money to a tax preparation company, it’s all good.
But resist the urge to pay for anything. Don’t pay for the state version. Don’t pay for one allowing for itemized deductions. Don’t pay for anything. Hell, don’t pay for Intuit’s other products like QuickBooks either if you can help it. Paying means putting money into Intuit’s pocket, which it can then turn around and use to lobby to make your taxes more complicated.
A boycott might seem a bit paradoxical: If the case for automatic filing is that it’s easier than doing your own taxes, isn’t TurboTax also easier than doing your own taxes? And, sure, it is. But it costs money, and you should get that convenience for free. In the meantime, doing your own taxes is a hassle, but not so huge of a hassle to not be worth it as a way to punish Intuit and push for a better system.
Moreover, that better system will help people who aren’t even filing taxes now, by making more of them aware of refundable credits. Even if a boycott isn’t in your own immediate self-interest, it’s worth doing to help them.
After years of using the paid version of TurboTax, I did my own taxes using Free File Fillable Forms for the first time in 2016. Yes, it was a bit annoying. But even though I itemize my deductions it only took a couple of hours, not much longer than TurboTax would. My 2017 tax situation was more complicated, as I moved between states and started renting out my old condo, so I hired a great accountant who doesn’t lobby the federal government to make taxes worse. It’s absolutely worth it.
If you have yet to file, don’t pay TurboTax a cent. If enough of us get on board, we might finally get to enjoy the return-free world we deserve.
More Info: www.vox.com