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Debate Intensifies Over Tax Filing Alternatives

Senator Elizabeth Warren, representing Massachusetts, has expressed strong disapproval of Intuit’s efforts to lobby against the IRS’s Direct File initiative. In a recent statement to the Associated Press, she highlighted that influential figures such as Donald Trump and Elon Musk oppose Direct File because it undermines the profits of major tax preparation firms, which often charge for services that should be accessible at no cost. Warren emphasized the American public’s desire for a straightforward and free way to file taxes, contrasting this with the interests of those who wish to maintain the status quo established by these large corporations.

While Intuit’s TurboTax does provide a free filing option for simple tax returns, the company has faced criticism and legal challenges over allegations that its marketing misled consumers. In 2022, Intuit reached a settlement requiring them to pay $141 million in restitution to affected consumers and to discontinue a specific advertising campaign that falsely claimed free filing.

Last year, the Federal Trade Commission (FTC) concluded that Intuit had violated U.S. law by engaging in deceptive advertising. As a result, the FTC ordered the company to clearly inform consumers when TurboTax is not genuinely free. In response, Intuit filed a lawsuit against the FTC, which is currently being reviewed by the U.S. Court of Appeals for the Fifth Circuit.

The IRS has also introduced its own free filing program, although its reach is limited to uncomplicated tax returns. Despite this limitation, there was optimism regarding its potential for expansion. The pilot program, which operated in twelve states, managed to assist 140,803 taxpayers. In May 2024, the IRS announced that Direct File would be established as “a permanent option for filing federal tax returns starting in the 2025 tax season.”

In its announcement, the IRS noted plans to broaden the range of tax situations that Direct File can accommodate over the coming years, with a particular emphasis on common situations faced by working families. The Treasury Department estimated that over 30 million taxpayers would be eligible to use Direct File in 2025, although the specific number of users has yet to be disclosed.

Furthermore, House Republicans have pressed for a swift termination of the Direct File initiative, urging Donald Trump to issue an executive order on his first day in office to dismantle what they deem an “unauthorized and wasteful” pilot program from the IRS, as outlined in a December 2024 correspondence.

Source
arstechnica.com