TurboTax says report about duping low-income taxpayers is ‘fake news’

It’s one of the most charged phrases in American culture at the moment and now a tax prep giant is using it to fend off accusations that it cheated customers.

Customer service representatives for Intuit’s TurboTax have been telling angry customers that an investigation by the nonprofit news website ProPublica is “fake news.” ProPublica has published a series of stories charging that TurboTax misled low-income taxpayers into paying for tax prep when in fact, they were eligible to file their taxes for free.

One 60-year-old man said he paid TurboTax for tax prep even though he made less than $30,000 in 2018. When he called the company to ask for a refund after reading the ProPublica piece, a customer service manager told him the ProPublica stories were “fake news.”

“She said what I read was fake news and I shouldn’t believe everything I read,” wrote the taxpayer, Steven Mueller, in a note to ProPublica reporter Justin Elliott, who shared it on Twitter. “She was very rude,” Mueller added.

Mueller confirmed the exchange to MarketWatch and said the experience “infuriated” him. Worse still, he didn’t end up getting a refund, he said.

“The part that most irked me was that she called it ‘fake news,’ because I hate that term,” Mueller told MarketWatch. “She was very condescending to me.” He was so angry that he hung up on the TurboTax rep.

Mueller qualifies for the free file program because he has little earned income. He took early retirement after a 33-year career at XEROX and has “significant assets,” he said, but most of his income is passive income from capital gains on investments and other sources. He said when he checked the box on TurboTax indicating he had passive income, he was automatically directed to TurboTax’s paid “premier” product, even though his low earned income made him eligible to file for free.

He ended up paying about $100 to file with TurboTax.

Mueller wasn’t the only one who said he heard the “fake news” line from TurboTax. Another TurboTax user posted a similar account of calling the company and being told the ProPublica stories were “fake news.”

ProPublica’s investigation has apparently caught the attention of political leaders. On Wednesday, New York Gov. Andrew Cuomo, a Democrat, asked state regulators to look into claims that TurboTax, H&R and other tax prep companies were “deceptively” hiding information about free tax prep from low-income customers.

ProPublica declined to comment.

About 100 million Americans who make $66,000 or less in annual income are eligible for free tax prep through a program called Free File, but only a fraction of those who qualified actually took advantage of the service last year. The IRS runs the Free File program in partnership with tax prep companies including TurboTax and H&R Block.

As MarketWatch also reported last year, searching Google for “free file” doesn’t do much to help taxpayers track down the service. Many of the results that come up first lead people to sites that advertise themselves as “free” but ultimately charge money. (Google did not respond immediately to a request for comment.)

ProPublica’s investigation found that TurboTax allegedly uses website coding that steers people away from its completely free version in search results. In fact, even though TurboTax is an official partner in the IRS Free File program, the tax prep company does not let users access the program through its own website, ProPublica found.

A TurboTax spokesman disputed Cuomo’s allegations. “We are committed to Free File’s shared goals,” said TurboTax spokesman Rick Heineman in an email. “Our search and marketing practices around the IRS Free File program have been called into question. These characterizations are untrue and we look forward to sharing the facts with New York regulators.”

He added that over the course of nearly two decades, more people have filed their taxes for free using an Intuit product than any other company.

As for ProPublica’s investigation, TurboTax acknowledged in a blog post that the company made certain sites easier to find in internet search results and said it would conduct a “thorough review” of its search practices. “While we believe amplifying this content meaningfully informed taxpayers and contributed to IRS Free File growth, we recognize that our overall search approach may have made it harder for some customers to find a TurboTax Free File Program landing page.”

A spokeswoman for H&R Block noted that H&R Block’s Free File program grew 8.3 percent this tax season. “We believe H&R Block is in full compliance with the Free File agreement,” H&R Block spokeswoman Susan Waldron said. In a blog post, the company said its goal is to “avoid customer confusion about our free options.”

The ProPublica investigation prompted readers to send in stories of how they were allegedly duped into paying TurboTax even though they were eligible to file for free.

One woman, who said she was unemployed and recovering from chemotherapy, said she paid TurboTax almost $200 to prepare her return, even though she and her husband made $32,877 in 2018. “Those $200 would have helped us pay for rent,” she told ProPublica.

“Fake news” is a favorite pejorative of President Donald Trump, who frequently uses it to dismiss news reports that are critical of him personally or his administration. It became widely known during the 2016 US presidential election when it was revealed that websites based in Macedonia were churning out sensational — and fictional —stories made to look like news articles, often shared widely on Facebook.

Intuit shares have been up 24 percent this year compared to a 13 percent increase for the Dow Jones Industrial and a 17 percent increase for the S&P 500.

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