Bloomberg Tax
March 7, 2023, 9:45 AM

Intuit Plays a Weak Hand in Defending For-Profit Tax Preparation

Andrew Leahey
Andrew Leahey
Hunter Creek Consulting

According to an OpenSecrets analysis, Intuit Inc. spent $3.5 million on lobbying in 2022. Despite these efforts from the parent company of TurboTax, Mint, Credit Karma, and QuickBooks, the discussion about the higher-level problem of for-profit tax preparation software has centered solely on TurboTax.

This is partially due to Intuit’s behavior and likely due to TurboTax’s popularity—a downside for a brand that has become a generic term. Sort of like Kleenex, if the facial tissue industry lobbied Congress to continue bilking the poorest among us out of their hard-earned cash.

Intuit, however, seems to be in a mess of hot water. The company is facing a lawsuit by the Federal Trade Commission to stop advertising free tax services that really don’t exist, and it settled litigation with states involving its “free, free, free” ad campaign. Sen. Elizabeth Warren (D-Mass) has, with others, called for the Department of the Treasury and FTC inspectors general to investigate Intuit’s practice of hiring former industry insiders.

Intuit isn’t the real problem here, though—that honor goes to the for-profit tax preparation software industry as a whole. Intuit CEO Sasan Goodarzi, inadvertently laid out the argument for a federal tax filing service while coming to the wrong conclusion: “A government-run tax preparation system that makes the tax collector the investigator, auditor, enforcer, and now also the preparer, is a conflict of interest.”

But is it?

TurboTax is seen on devices on Feb. 22, 2018, in San Francisco.
Photographer: Kimberly White/Getty Images for TurboTax

To discuss a potential conflict of interest, let’s tease out the contours of the interests at hand. Giving Goodarzi the benefit of the doubt, he’s referring to the interests of the government and those of the taxpayer; any indication that one of the specific interests is Intuit’s would seem to give the entire game away. One must assume that the interest for the government is to collect as much tax revenue as possible, and taxpayers’ interest is to pay as little tax as possible.

If removing Intuit and its competitors from the equation would cause a conflict of interest, we can assume Intuit is doing something to stand between the government and taxpayers. This is where we must make some leaps—it’s not clear what Goodarzi would expect the government to do if it was the preparer. The simplest explanation would be that the IRS would make it difficult for taxpayers to claim deductions and credits that they deserve.

Of course, this raises the question of what’s stopping the government from acting in its capacity as investigator, auditor, or enforcer to bilk the taxpayer. The answer? Nothing.

A third-party preparer that isn’t vested with any dispute resolution ability can’t do anything to rein in the party with enforcement power. Peeling off “preparer” from the above list and introducing a third party does nothing to protect anyone’s interest, save for that of said third-party preparer.

If Intuit made an error in preparing returns, a taxpayer’s final destination for redress would be the court system—if a public preparation service made the same error, redress would look the same. But unlike the government, Intuit could take various measures to limit its liability to harmed taxpayers. Presumably, a well-crafted public preparation service would come with a clear path for filing disputes and would be backed by the somewhat less bankrupt-able federal government.

Inefficiency is the only thing furthered by maintaining the status quo of third-party preparers, other than their own valuations. For most taxpayers, the IRS already has all the necessary information to process a return.

From a 10,000-foot view, the entire tax preparation process looks like an arcane ritual or math class—one party has all the right answers, and the other is given the necessary information to arrive at the right answers but needs to enlist help to put the disparate bits together. The entire thing looks less like an individual paying their fair share and more like 157.5 million yearly tax exams.

There’s concern that the focus on Intuit’s potential wrongdoing will absorb a lot of the political will and social outrage—but that should be on the practice as whole. We’ve spoken before about the need for a tax filing system overhaul and, indeed, last year’s tax and climate law sets aside $15 million for the IRS to investigate how a federal system could be deployed.

That seems like a lot, right? Sure, Intuit’s market cap is north of $110 billion, and H&R Block Inc. comes in just a shy above $5.5 billion. And the federal government collects most of its revenue from individual taxpayers—to the tune of about $4.9 trillion.

If institutional investors—which largely have been exiting their positions on Intuit while increasing their holdings of H&R Block—are any indication, the market expects Intuit to take the fall for the industry. But individual failings and alleged predatory practices at Intuit are as much symptoms of making tax preparation a for-profit enterprise as they are indicia of corporate misdeeds.

This is a regular column from tax and technology attorney Andrew Leahey, principal at Hunter Creek Consulting and a sales suppression expert. Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at

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