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Tax Prep Company Intuit Ramps Up Lobbying Ahead Of Free File Fight

Intuit, best known for its TurboTax and QuickBooks software, has ramped up its lobbying spending ahead of the release of a long-awaited Treasury Department report on the practicality of allowing taxpayers to file their information online, for free, directly to the IRS.

The report, which could come as early as Tuesday, will arrive at a time when the long-simmering fight over whether and how taxpayers should be able to directly settle up with the government is set to heat up.

The Free File program began in October 2002 with an agreement between the IRS and 17 tax prep companies, including tax prep giants Intuit and H&R Block, to have 60% of the population eligible for free preparation and filing, based on adjusted gross income, through commercial partners.

More than two decades later, though, that group, now known as Free File Inc., is down to seven members, and Intuit and H&R Block are no longer part of the effort. At the same time, the number of people using Free File fell by 16% in 2023, according to a Treasury inspector general report, to only about 1 million out of the almost 55 million returns filed this year.

“This was an experiment in trying to create free filing through market forces. And it has unfortunately been a failure,” Kitty Richards, a former Treasury Department official, said in a virtual press briefing hosted by the liberal groups Groundwork Action and the Economic Security Project.

Free File’s state has led to an increased push to simply allow taxpayers to file directly to the IRS. The upcoming report, mandated by the Inflation Reduction Act, is meant to look at the feasibility of that, and The Washington Post reported Monday that the IRS has already built a prototype direct electronic filing system to be rolled out next year.

“This was an experiment in trying to create free filing through market forces. And it has unfortunately been a failure.”

– Kitty Richards, former Treasury Department official

According to a new report from Groundwork Action, the political arm of progressive economics group Groundwork Collaborative, Intuit’s lobbying efforts are the latest chapter in a long effort to maintain its market share in the electronic tax prep market, even as pressure has been building to make it easier for consumers to bypass commercial tax software.

“The IRS must ensure that all Americans have the choice to file through an easy and straightforward public option that would be available to anyone who wants it and take minutes to complete,” Igor Volsky, Groundwork Action’s executive director, said.

The report is a retrospective of what the group calls “Intuit’s Taxpayer Racket,” ranging from reports that the company tried to make its free filing offerings less visible in web searches to discourage their use to instances of company officials calling government-offered free filing a “conflict of interest” even as it made it more difficult for some groups, like people with disabilities or unemployed people, to file.

Citing data from the nonprofit money and politics website OpenSecrets, the report says Intuit spent a record $3.5 million on lobbying in 2022 and has spent more than $44 million since 1998.

Separately, OpenSecrets has reported that Intuit spent $980,000 on lobbying in just the first three months of 2023, a pace that if maintained would result in another record year for Intuit lobbying spending.

Intuit declined to break out how much of the increase in lobbying was due to the Free File program.

In a statement to HuffPost, a company spokesperson said: “Intuit strongly believes in advocating on behalf of its customers. We engage and educate policymakers on various issues, from AI and innovation to benefit individuals and small businesses to stronger consumer protections and tax simplification.”

A poll developed by the Economic Security Project and the progressive polling project Navigator found that a direct filing system, without having to go through a commercial software site’s portal, would be popular.

Adam Ruben, vice president of campaigns and political strategy for the Economic Security Project, said 60 million Americans have such simple returns, the IRS could do them automatically.

“If just half of those taxpayers used a free and simplified system, it could save Americans a combined $7 billion and a total of 32,000 years of life — every single year,” he said.

“The IRS must ensure that all Americans have the choice to file through an easy and straightforward public option that would be available to anyone who wants it and take minutes to complete.”

– Igor Volsky, executive director of Groundwork Action

Intuit said a direct file system would not be cheap to build or operate.

“An IRS direct-to-e-file system will create a clear conflict of interest for the IRS, given its role as tax collector, administrator, auditor, and enforcer,” a company spokesperson said. “The IRS becoming the judge, jury, and executioner of people’s personal finances is un-American.”

“We will continue unapologetically advocating for American taxpayers, simplifying the tax code, and against a direct-to-IRS e-file system because it’s a bad idea that will especially hurt low-income and other vulnerable individuals and families,” she added.

Intuit also pointed to a 2022 poll by Remington Research Group where 75% of respondents said they would not support giving the IRS new authority to prepare returns and file them on behalf of taxpayers.

Intuit still offers free filing on its own, despite no longer being a part of the Free File program. It said 113 million people filed for free using its software over the past nine years.

On Friday, Reps. Brad Sherman and Katie Porter, both Democrats from California, sent a letter to IRS Commissioner Danny Werfel urging him to start work on a direct filing program, using some of the $80 billion destined for the IRS in the Inflation Reduction Act.

“Providing an easy and streamlined filing service is both technology modernization, and good customer service,” Porter and Sherman wrote in the letter, which was co-signed by 16 other House members. “An IRS filing service could indeed be a centerpiece of the agency’s ongoing renewal.”