How TurboTax (Secretly) Makes Your Taxes A Nightmare

5 American Taxes Are Uniquely Convoluted (And TurboTax's Design Preys On Our Fear)

On some level, figuring out what we owe in taxes should be pretty easy for most of us, right? One-half of American taxpayers get all their income from just one company and collect all their interest from just one bank -- both things the IRS could determine on their own. Plenty of other governments do this. Japan mails citizens a postcard with how much they owe, Swedes receive a text message, and even freaking Estonia's entire filing process takes five minutes. By contrast, most Americans fill out their own forms -- even though it's mostly just to tell the IRS shit they already know.

America's system is complicated as hell (and getting worse), and, understandably, Americans are terrified of the whole thing. Compliance costs are roughly 10 times higher than the average European country, and the IRS disproportionately targets poor people. It's expensive, hard to understand, and feels very high-stakes. TurboTax is acutely aware of all this madness and how we'll do basically anything to file in a way that feels safe. They prey on that fear.

Every year, TurboTax looks into their system for new ways to create "dark design" features that squeeze every last dollar out of nervous taxpayers. As an example, they promote their "Deluxe Edition" with its ability to "maximize your deductions", even if you qualify for a free return that'd give you the exact same result. TurboTax even allows some users to begin a "free" return, only to cause a paywall to pop up somewhere in the middle of the process. Most customers still agree to pay rather than start over or have to attempt to file on their own, because they couldn't handle the stress.

Also, you know those cutesy animations that "comb through our return" looking for problems? They're bullshit. Those "calculations" are made instantaneously. There's no reason for us to wait, except doing so both terrifies us about the process and assures us TurboTax has our back in equal measure.

4 Intuit Lobbies Insanely Hard Against Any Governmental Proposal To Make Taxes Easier

But okay, so TurboTax is maybe taking advantage of us, but it's not their fault the system is so bad, right? Wrong. The company that owns TurboTax, Intuit, actively lobbies to keep taxes complicated.

In 1998, Intuit hired a former lobbyist named Bernie McKay to be their vice president of corporate affairs. The year they hired this self-described "Darth Vader", Congress passed a massive bill ensuring the IRS "should cooperate with and encourage the private sector" when it comes to electronic tax filing.

Four years later, the Bush Administration considered creating a (free) electronic filing system of their own to help simplify the process. This would be a direct competitor to companies like TurboTax, however, so before any progress could be made, TurboTax lobbied a bunch of Republicans into contacting the IRS. They even lobbied the White House directly.

The IRS was suddenly accused of making "secret plans to undercut the industry", but thankfully Intuit stepped in to help. Intuit would create a free version of their program for lower-income users, to ensure more people could easily file their taxes. The IRS was forced to acquiesce as they were sure they'd never get the funding to set up a system of their own after Congressional opinion turned against them.

As recently as 2018, TurboTax was inches away from forcing through a law that would essentially make it illegal for the IRS to ever create their own filing system. It only fell through because journalism outfits like ProPublica dug into TurboTax's decades of shittiness in response to the bill. Here's a graph that shows just a few instances where TurboTax stepped in to screw meaningful reform from happening.

3 TurboTax Actively Hides Their Free Edition

The whole deal with the free system was that companies like TurboTax would offer that option as long as the IRS promised to never create a version of their own. Under this agreement, some 60% of the country (78 million people) would qualify to do their taxes completely for free with private companies. And one the one hand, that's great! More Americans could get free tax help, and it wouldn't cost the government a dime.

Except while TurboTax did totally create a free version of their system, remember they heavily push their Deluxe Edition and hide the free option (even for people who qualify). And, that's just the start. Not only is the Free Edition impossible to find on their website, they actively pay to hide it from Google search results. They're literally having their coders do reverse Search Engine Optimization to ensure lower income people never accidentally realize they can do their taxes for free.

Additionally, as long as the federal return process is free, the IRS allows these companies to push other side products like meaningless "audit defense" and loans and other random crap. Even if somebody does manage to stumble upon the free version, there's nothing protecting them from being upsold by TurboTax's predatory design and marketing tactics.

2 Intuit Actually Beat An Anti-Trust Case And Got The IRS To Kill Their Competition

But, okay, so TurboTax is evil and shitty, but at least the beauty of capitalism is another company could come along and improve upon the product or the price (or, you know, actually make it visible on Google) and the resultant competition could help consumers out. Totally.

Back in 2005, a company called TaxAct did just that. They expanded the free program idea to make filing free for everybody. You didn't have to qualify, anybody could just do their taxes for free. TaxAct profited by getting people in the door then using similar upselling tactics, but if you were on their website, you knew at least your federal return could be done completely for free -- no hidden fees.

As you can imagine, Intuit didn't like that, so they once again burst in the doors of the IRS like an older sister sick of her brother sneaking in her room. They argued Americans filing for free should be illegal. Obviously that makes zero sense, and the Department of Justice wrote a memo stating "any agreement among to restrict such free services is likely a form of price fixing" which is itself illegal and against antitrust laws.

But Intuit--having the best lobbyists ever--explained to the IRS how, sure, it's illegal now, but if you changed the law, it wouldn't be illegal! The IRS couldn't argue with that nigh-perfect logic, and changed the damn law to make it illegal to offer free filing service to everybody and essentially crushing TurboTax's primary competition for them.

The end result is TurboTax currently has a 67% market share and is looking to expand even further. Hooray?

1 Americans Are Spending Billions On Tax Filing Thanks To Intuit's Efforts

And here's the bottom line -- this shit is expensive for actual people. Depending on who you ask, Americans are spending literally billions of hours and something like hundreds of billions of dollars just to do their taxes. That kind of money blows away revenue from the music industry--a thing people actually want to spend money on. Complain all you want about how taxes are theft, but the taxes we pay pale in comparison to the amount of money we spend just to ensure our taxes are paid in the first place.

And where does that money go? Primarily to the dicks in charge of Intuit and TurboTax.

Intuit co-founder Scott Cook is one of the richest people in the country. As of 2019, he was worth $3.3 billion. All because they figured out how to run a massive scam and get the government in on it, because the government generally (and Republicans specifically) continue to defund the IRS. You know, sometimes it almost feels like a government willing to capitulate to corporate interests miiight not be all that great.

Jordan Breeding is currently the creator, writer, and host of Cracked's new YouTube series "Your Brain On Cracked." He's also on Twitter and has written for a whole mess of other sites.

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