TurboTax

TurboTax. It is a popular income tax preparation software package developed and sold by the financial software company Intuit. Primarily designed for the United States and Canadian markets, it guides individuals and small businesses through the process of filing federal and state tax returns. The software is available in both desktop and online versions, offering a range of products tailored to different tax situations, from simple returns to more complex filings involving investments, rental properties, or self-employment income.

Overview

The software operates by interviewing users in a question-and-answer format about their financial and personal situations, such as wages, interest income, and charitable donations. It then uses this information to populate the appropriate tax forms, such as Form 1040 in the U.S., and performs calculations to determine a user's tax refund or tax liability. TurboTax checks for errors and identifies potential deductions and credits, aiming to maximize the user's refund or minimize the amount owed. It supports electronic filing (e-filing) directly with the Internal Revenue Service and relevant state revenue departments, and allows for direct deposit of refunds.

Features and services

Key features include its user-friendly interface, step-by-step guidance, and a system that imports data from financial institutions like Wells Fargo and employers. The software offers access to its Live Assisted service, which provides advice from credentialed tax professionals, and a full-service option where an expert completes the return on the user's behalf. It includes tools for tracking refund status, audit support, and a guarantee that covers penalties and interest if caused by a calculation error. For more complex situations, versions like TurboTax Premier handle investments and rental property, while TurboTax Self-Employed caters to freelancers and independent contractors, integrating with QuickBooks for business expense tracking.

Business model and pricing

Intuit employs a freemium model for its online products, offering a free version for simple tax situations, often promoted through the IRS Free File Program. More complex returns require upgrading to paid tiers such as Deluxe, Premier, or Self-Employed, each with increasing costs. The company also generates significant revenue from its desktop software sold through retailers like Best Buy, and from fees for state tax return filings, which are typically separate from federal filing costs. Additional revenue streams include fees for refund anticipation services, professional tax advice add-ons, and its partnership programs with financial institutions.

Criticism and controversies

TurboTax and Intuit have faced substantial criticism and legal challenges. They have been accused of using deceptive marketing to steer eligible taxpayers away from the truly free IRS Free File Program, a settlement with all 50 states and the District of Columbia in 2022 resulted in a $141 million payment for this practice. Critics, including ProPublica, have documented the company's extensive lobbying efforts to complicate the U.S. tax code and block the IRS from creating a free, competing direct-file system. Other complaints involve confusing pricing structures with hidden fees, difficulties in canceling subscriptions, and the software's role in facilitating fraudulent tax filings through identity theft.

History

The product originated from the 1984 purchase of a software program called ChipSoft by Scott Cook and Tom Proulx, the founders of Intuit. Initially named "TurboTax" in 1993 to align with Intuit's Quicken brand, it quickly became the market leader in consumer tax software. Key milestones include the launch of its online service in the late 1990s, the acquisition of competing products like ProSeries, and the introduction of mobile apps. Throughout the 2000s and 2010s, it defended its market position against competitors like H&R Block and TaxAct while navigating ongoing regulatory scrutiny and adapting to annual changes in tax law. Category:Tax preparation software Category:Intuit