Scrutiny of TurboTax and H&R Block intensified as U.S. senators Elizabeth Warren, Bernie Sanders and other lawmakers called for an investigation into whether the tax prep giants intentionally steered low-income customers away from free filing services.
The move follows an investigation by the nonprofit news website ProPublica that found that TurboTax INTU, -1.05% and H&R Block HRB, -0.56% use website coding that drives customers away from the free tax prep services that those companies are supposed to provide as part of an IRS program called Free File. Any taxpayer who makes less than $66,000 in income is eligible for Free File, but not many take advantage of the program.
“These companies’ actions in hiding Free File from search engine results — and therefore from consumers — in order to artificially inflate profits and deprive low-income consumers of a cheaper product merit investigation as unfair and deceptive practices,” the lawmakers wrote in a Friday letter to the FTC.
In a separate letter to the IRS, the lawmakers called on the IRS “to take any available actions” to remove TurboTax and H&R Block from the Free File program.
The letters were signed by — among several other lawmakers — three of the now-21 candidates for the 2020 Democratic presidential nomination: Warren, a Democrat from Massachusetts; Sanders, an independent from Vermont; and Cory Booker, a Democrat from New Jersey.
TurboTax spokesman Rick Heineman did not respond specifically to a question about the lawmakers’ move, but reiterated that TurboTax is “committed to growing Free File, not shrinking it.” He added, “More people have filed their taxes for absolutely free using a TurboTax product than any other company. Any suggestion that Intuit doesn’t support Free File is flat wrong.”
An H&R Block spokeswoman noted that H&R Block’s Free File program grew by 8.3% this year, compared to a 6.8% increase among taxpayers overall. The company has previously disputed ProPublica’s findings.
A IRS spokesman said the agency is reviewing the concerns raised about the Free File program and has contacted TurboTax, H&R Block and others. “We take these issues seriously, and a senior leadership team was assembled to review the current Free File program,” said IRS spokeman Bruce Friedland. “The IRS continues to believe it’s critical to provide wide access to free electronic filing of tax returns, particularly for lower-income households. The IRS team will take fast action to ensure the integrity of the program.” The FTC did not respond immediately to requests for comment.
When some TurboTax customers who were eligible for Free File but paid for TurboTax called the company to ask for a refund, some customer service reps called the ProPublica stories “fake news.”
The ProPublica coverage also prompted New York governor Andrew Cuomo to call on state regulators to probe TurboTax and H&R Block.
ProPublica reported Thursday on internal documents from H&R Block that showed the company instructed its employees to guide customers away from its free products. “Do not send clients to this Web Site unless they are specifically calling about the Free File program,” the document stated, according to ProPublica, referring to the site with the company’s free option. “We want to send users to our paid products before the free product, if at all possible.”
Intuit shares have been up 26% this year and H&R Block shares have been up 5.93%. That compares to a 13.62% increase for the Dow Jones Industrial Average DJIA, -1.02% and a 17.38% increase for the S&P 500 SPX, -1.08%
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