Tax Scam: Did I Get Scammed by TurboTax?

If you’re like most people, you probably don’t think too much about taxes until tax season rolls around. Or until you hear about a tax scam.

Whether that’s organizing your receipts or placing your tax documents in a file—when you’ve finally filed in March or April, you turn your attention elsewhere.

So why is this year somehow different? What has forced tax return filing back into the national spotlight? Unfortunately, headlines just like these:

  1. TurboTax Tricked Taxpayers Into Paying for Its Free Tools, Lawsuit Says
  2. TurboTax maker Intuit accused in lawsuit of deceptive practices with lower-income taxpayers
  3. TurboTax and H&R Block are sued for allegedly keeping Americans from filing taxes for free

Uh oh.

TurboTax sits at the center of an earth-shattering scandal that involves tricking customers into paying for tax filing services that should have been provided free.

At this point, it’s unlikely you’ve missed the story on the evening news or on your Facebook feed at some point, but even if you’ve seen the headlines, you may still be a little bit unsure about what, exactly, happened.

What did the company behind TurboTax allegedly do? How many people did this impact? Now H&R Block is involved?

If you’ve used TurboTax and H&R Block to file taxes, right now there’s one question you’re probably asking yourself more than any other:

Did I get scammed by TurboTax or H&R Block?

While we certainly can’t answer that last question exactly, we’re going to try. We’ll give you some context about what happened, who it happened to, and what to expect in the future.

So Is This a Tax Scam?

Late in April, headlines started popping up alleging that two of the largest tax preparation software and filing companies, TurboTax and H&R Block, had been employing methods to lure their customers away from the government-sponsored free filing software, instead making them pay for the service.

Why is this a big deal?

Well, here’s a bit of background. The standard method of filing your taxes—printing out forms, filling them out by hand, and mailing them in to the IRS—is fairly inexpensive. You may pay a couple dollars printing out the forms, a few cents on paper and ink, or a little money on a stamp, but it’s relatively affordable.

However, filing that way is much more time consuming and rife with error. In 2019, unless you absolutely need to for one reason or another, it usually makes more sense to let some sort of tax preparation service or a software do the heavy lifting when it comes to all the calculations.

The IRS doesn’t think filing taxes should be a financial burden for those with low incomes, so it recommends options on its site for those who meet certain income requirements.

What Did TurboTax and H&R Block Do?

H&R Block and Intuit, the maker of TurboTax, signed a deal with the IRS pledging that they would “help tens of millions of Americans file taxes for free.” One part of this agreement more or less helped to prevent the IRS from creating its own free online filing system. This Free File partnership has led a relatively peaceful existence for the past sixteen years.

Unfortunately, the issue is with how H&R Block and Intuit did—or did not—guide customers toward their free option.

According to internal documents and recorded phone calls with the company, the companies intentionally hid the free option from their customers, steering them instead toward paid products. (You can check out some of the recordings and emails via the link at the top of this section.)

Ultimately, free filing software is a competitive threat to paid filing software. And the requirement to provide both free and paid options, it can affect the bottom line.

Allegedly, these companies sought out direct and indirect ways of turning free customers into paying customers, like hiding free file pages from search engines, directing sales teams and phone operators to guide callers toward paid services, and designing pages to minimize the presence of the free file option.

Did I Get Scammed by TurboTax or H&R Block?

Of course, we don’t know if you fell victim to some of these strategies. Technically, though, these stories haven’t been proven, only alleged. Even the lawsuit Los Angeles recently opened up merely alleges these actions so far!

However, if you did pay for H&R Block or TurboTax services in the past few years when you otherwise qualified—and thought you were getting the free option at first—you may have been guided away from the free file option.

So what does that mean for you in the future?

What Actions Should I Take?

Well, first, you shouldn’t blame yourself. If H&R Block and Intuit did take measures to hide their free file options from you, then it’s understandable you may have ended up paying.

Right now, the best thing you can do is to get your paperwork in order. If you think you used one of those services, double-check. If you wanted Free File software but ended up paying, did you speak with someone on the phone? And if you filed this year, you should consider calling companies to inquire about your return!

Ultimately, you just want to get all of this information in one place. Should a regulator or group open up a class-action lawsuit, it’ll be a lot easier to get compensation.

Avoiding a Tax Scam When Filing Next Year

Hopefully, you now have a much better sense of what’s going on with TurboTax and H&R Block. It may not be a tax scam, but it doesn’t all look rosy.

This issue will make an impact on the tax preparation industry—and so can you. When choosing your tax preparation service next year, you can let your money do the talking. If that means opting for another service, go for it. There are plenty of cheap free filing options available. And if you do use TurboTax or H&R Block, be sure to ask and confirm that you’re getting access to the Free File options.

You deserve a tax preparation service that is truly on your side. And you deserve that every year.

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