Content of the material
- Why States Went After TurboTax
- TurboTax pros and cons
- A Better Way
- How does TurboTax make money?
- Here are the 3 ways of how TurboTax makes money in 2022
- If TurboTax has a free edition, what’s the difference?
- TurboTax profit and revenue
- About the FTC
- Advice and Guidance
- How Does TurboTax Work?
- Success Story of TurboTax
- How much is TurboTax?
- Is TurboTax really free?
- Do you have to buy TurboTax every year?
- What does TurboTax free edition cover?
- Can you use TurboTax on your phone?
- What is the best tax preparation company?
- How Much Money Could You Get?
Why States Went After TurboTax
For years, TurboTax parent company Intuit ran an ad campaign claiming it would help consumers do their taxes for “free, free, free.” Authorities say the ads created confusion between a free version of TurboTax that was available through the IRS Free File Program, and the company’s “TurboTax Free Edition”*—which, in fact, was free for only about one-third of U.S. taxpayers with the simplest returns.
Many who were eligible for free TurboTax through the IRS program instead used the TurboTax Free Edition* and were deceived into paying, says New York Attorney General Letitia James.
“Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans,” says James, in a May 4 news release.
Intuit has admitted no wrongdoing as part of the settlement, reached with all 50 state attorneys general and Washington, D.C. The company has agreed to pay restitution to roughly 4.4 million taxpayers and make changes to its advertising practices.
Separately, the Federal Trade Commission is pursuing a lawsuit against Intuit over the marketing of its free filing options. The company says the agreement with the states now makes the FTC’s suit “entirely unnecessary.” There’s been no word from the regulatory agency.
TurboTax pros and cons
There are a few major pros of using TurboTax, including the following benefits:
- The company’s user-friendly interface. Doing your taxes is both quick and easy thanks to the auto-filled forms and the fact you’re asked simple questions to complete your forms and identify opportunities to save.
- The chance to get support from a tax expert. If you want added reassurance, access to professional advice from a real person can make all the difference.
- The TurboTax guarantees. Tax penalties can be costly but you won’t have to worry about owing money due to a math error.
- Audit support: You’ll get free answers to questions year-round if you’re audited by the IRS. And TurboTax provides the option to get professional advice at an additional cost.
- Access to tax experts: If you’d prefer to have an expert prepare your tax return, TurboTax offers this option.
There are also some cons to consider. The disadvantages of TurboTax include the following:
- The program can get expensive, especially if you pay for live support. Unfortunately, you cannot claim common deductions, including the student loan interest deduction, if you use the free version, so many filers will have to pay.
- The maximum refund guarantee only refunds what you paid to file (or $30 if you used the free version). If you missed out on deductions or credits, TurboTax doesn’t refund you the amount you’d have saved on your taxes.
It can help to compare TurboTax to other tax preparation software available such as TaxAct and H&R Block. With a side-by-side comparison of TaxAct vs. TurboTax vs. H&R Block, you can better determine if TurboTax maximizes the advantages you need while limiting the drawbacks.
A Better Way
The truth is, no one should profit on their access to the info you provide on your income taxes, so Ramsey Solutions launched Ramsey SmartTax, an inexpensive tax software that’s simple, accurate and safe.
“We partnered with the folks at TaxSlayer, and your data won’t be sold or used to sell you credit cards or anything else,” Dave said.
SmartTax has no hidden fees and no hidden agenda. It’s simple software to get your taxes done right the first time!
“Even though death and taxes may be a part of life, debt doesn’t have to be,” George said.
How does TurboTax make money?
According to the IRS, “Nearly 184.6 million returns and other forms were filed electronically” in 2019. This number represents 72.9 percent of all filings. Of that, roughly 40 million of them did so using TurboTax.
So how much money does TurboTax make off of those 40 million tax filers using their software and services?
Below is a breakdown of how much money TurboTax makes and its revenue model. Including all their revenue streams and how much money they make off each service.
Here are the 3 ways of how TurboTax makes money in 2022
TurboTax has a revenue model that makes money in three (3) ways; Making all of their money through providing tax services, but they offer different service types to fit your taxing needs.
The TurboTax business model is a combination of an A la carte service, Infrastructure as a service (IaaS), and Fee for service (FFS). Meaning they provide the tools and help (aka the tax forms and accountants), and the filer picks and chooses what best fits their needs of services to add on or not use.
If TurboTax has a free edition, what’s the difference?
In an email in July, an Intuit spokesperson told CNET that the company plans to expand the benefits of using its TurboTax Free Edition to “complete financial health in tax and beyond.” According to the representative, such an extension of services was not possible under IRS Free File rules.
“TurboTax Free Edition is a different product than what TurboTax donates for free tax preparation through the Free File program,” they said. “The Free File program offered by Intuit is called IRS Free File delivered by TurboTax. They are fairly similar, but the Free File program guidelines do not allow us to do things like provide our filers with a completely free of charge advance on their refund if they need money faster in order to pay bills.”
TurboTax profit and revenue
TurboTax has not released any official reports in regards to company earnings.
Note: Because Intuit Inc., parent company of TurboTax, is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Intuit’s publicly released financial reports through Intuit’s 10-K Annual Report investors section on their website.
About the FTC
Our mission is protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity.
Advice and Guidance
Learn more about your rights as a consumer and how to spot and avoid scams. Find the resources you need to understand how consumer protection law impacts your business.
How Does TurboTax Work?
Filing your taxes with TurboTax is a fairly simple process. In the first step, the user keys in his or her email. Afterward, they are asked to answer a short survey about their financial situation.
The survey results allow TurboTax to determine what of its products is best suited for the needs of the user.
Users don’t need to provide their W–2s or 1099 details in the survey. TurboTax is able to automatically import that information from over a million employers and financial institutions.
For more complex tax situations it is advisable to provide additional documentation such as mortgage statements or medical expenses.
The TurboTax software then automatically finds possibilities for tax deductions. It scouts its database for over 400 possible applicable credits and deductions (e.g. student loans or donations to charities).
Because TurboTax Online is hosted on the cloud, progress on the tax deduction will be synched across all registered devices.
If the software isn’t enough, then users have the option to consult a certified tax professional during any step of the process. These experts are vetted by TurboTax to ensure quality advice. If users want to save that money, they can simply ask for help in a dedicated forum section.
Success Story of TurboTax
TurboTax is a software product used to prepare income tax returns.
Intuit acquired the software in 1993 for around $225 million from Michael A. Chipman.
Intuit was the most prominent provider of personal finance software solutions in the United States during this time. Consumers were also largely unaware of internet-based tax filing in the 1990s.
TurboTax Online launched in 1999, giving the firm a six-year head start over competitors such as Microsoft.
TurboTax sold around 4.2 million copies in the first year it was released. To maintain its market dominance, the corporation launched an intensive sales campaign.
Furthermore, it offered a freemium edition to low-income clients without sacrificing functionality. During the early 2000s, TurboTax’s free version was so popular that it captured 60% of the market.
During the next few years, the organization expanded rapidly by targeting taxpayers who relied on paper returns.
The user experience was enhanced based on a comprehensive understanding of its target demographic.
TurboTax’s revenue growth increased by 11% in 2020, primarily because of the COVID-19 pandemic.
How much is TurboTax? The price varies by product. There is a free option if you have a very basic return, but prices range from $39 to $389 if you have a more complicated return or prefer to have a tax expert complete your return. Is TurboTax really free? Tax filing with TurboTax is free if you have a very simple tax return. Beyond that, pricing varies for different products and levels of support. You will have to pay if you need to claim certain deductions or credits; if you have business expenses or earn small business income; or if you have income from investments or a rental property. Do you have to buy TurboTax every year? You will need to pay for TurboTax each year when your taxes are too complicated to use the free edition or when you want live support. What does TurboTax free edition cover? You can use the free edition if you only have W-2 income and you are claiming only the Earned Income Tax Credit and child tax credits. You cannot use it if you have income from other sources or wish to claim other deductions, including the deduction for student loan interest or mortgage interest Can you use TurboTax on your phone? TurboTax offers a mobile app for Apple and Android devices. You can use the app to complete all your tax forms or to simply snap a photo of your W-2 so the information can be imported into your tax forms. You can also connect with a tax expert from your phone if you use TurboTax Live. In addition to its tax app, TurboTax also offers a TaxCaster app to quickly estimate the amount of your tax refund as well as an app to keep track of deductible charitable donations called ItsDeductible. What is the best tax preparation company? While TurboTax is an excellent tax filing option, there are several good alternatives out there including FreeTaxUSA, TaxSlayer, TurboTax, H&R Block, Jackson Hewitt, TaxAct, and Credit Karma. To find the best one for you, shop around and compare prices and features.
How Much Money Could You Get?
The settlement will pay certain TurboTax customers roughly $30 for each tax year they paid to use the TurboTax Free Edition*, up to a maximum of three years. (Note that the refund amount is only about half of what a person would pay for the cheapest nonfree TurboTax plan, priced at $59 a year.)
Here are the criteria you must meet to be eligible for a payment:
- When you used TurboTax. You must have used TurboTax’s Free Edition* to file your return in any of the 2016 through 2018 tax years.
- You paid even though you could have filed for free. You were charged for the Free Edition*, but qualified for the no-cost version of TurboTax available through IRS Free File. You would have been eligible for that program if you earned less than around $34,000 per year or were a member of the U.S. military.
The largest possible refund is about $90, for all three tax years in question.
If you’re eligible to receive money from the settlement, officials say you don’t need to do anything to claim your funds. Notices and payments will be mailed automatically, says the release from the New York attorney general’s office.