L.A. City Attorney Mike Feuer Tuesday will publicly detail a civil lawsuit he has filed seeking an injunction and penalties against two large national tax preparation companies for allegedly engaging in “deceptive and manipulative” business practices that cost low-income taxpayers millions in unnecessary upgrades and upsells.
At a late-morning City Hall news conference, Feuer will discuss the suits he filed Monday against Intuit, the maker of TurboTax, and H&R Block. He alleged in his suits that the two companies have connived for years to discourage millions of taxpayers from taking advantage of a free, simple online system provided by the Internal Revenue Service.
Feuer accuses the firms of “actively undermining public access to the IRS’ “Free File” program, which allows the lowest-earning 70% of taxpayers — those with adjusted gross income of $66,000 or less — to prepare and file their federal and state taxes online for free, using the commercial services, the Los Angeles Times reported.
Feuer compared the tax-preparation firms’ behavior to that of Wells Fargo, another of his corporate targets. His 2015 lawsuit against Wells Fargo helped blow up the scandal over the bank’s opening of thousands of bogus accounts for customers and others.
“That was a major corporation taking advantage of the consumer,” he says in remarks quoted by The Times. “There are some parallels. I want to hold the tax-preparation companies accountable and I want to deter this behavior.”
Free File is a full-featured program that serves taxpayers no matter how complicated their taxes. But it’s little-used; according to an investigation published last week by ProPublica, on which key elements of Feuer’s lawsuits are based, only 3% of eligible taxpayers use Free File. That’s 3 million of the 100 million taxpayers eligible.
“We allege that’s no accident,” Feuer told The Times. “Both Intuit and H&R Block have created impediments to the IRS system.”
Feuer alleges that Intuit and H&R Block have deliberately concealed Free File from taxpayers and steered them instead to their own “free” programs, which are watered-down versions of software for which Intuit charges as much as $120 and H&R Block as much as $105. The firm’s “free” programs are useful only to taxpayers with wage income from employers. That leaves out independent contractors or those with itemized deductions.