It’s tax time again and if you’re stubbornly independent like me, that means it’s time for another foray into the murky waters of tax preparation. Last year, I successfully filed my family’s tax return electronically using Free File Fillable Forms, a no-frills, unbranded online tax-preparation software program.
Calling last year’s tax experience a success may be a stretch. I spent hours reading IRS instructions, making spreadsheets, filling out forms, and changing details as my wife kept remembering extra pertinent information. Finally, I settled on a set of defensible numbers, electronically filed my return, and waited for the site to confirm receipt. An email arrived with a list of errors and omissions upon my return, each error delivered in the cryptic style of a software bug report. I deciphered these errors one by one and then e-filed again, continuing through this process a few times until I received a message that said, “Congratulations, the IRS has accepted your federal return.” Relieved to be done, I banished taxes from my mind — for a little while, at least.
At the end of April 2018, a letter arrived from the IRS office in Fresno, California. It said, “We need more information to process your return accurately.” The letter instructed me to download and fill out another form so I printed the form, did my calculations, and faxed it in. A month later, I received another letter saying that I’d overpaid my taxes. In a small table at the bottom of the letter, I immediately recognized the key tax number from my 1040 form, sitting proudly alongside an inexplicable number proffered by the IRS. The letter promised a refund check for the difference in four to six weeks.
I returned to the Free File Fillable Forms website to check my work and I quickly spotted the error: I had forgotten to recalculate the taxes due after changing some numbers in a different part of the return. An IRS refund check arrived in the mail soon after and brought me closer to emotional equilibrium, but this time I couldn’t banish the thought of taxes from my mind completely.
“I’m not a stupid man,” I reminded myself. “How could I, a doctor — well, not a real doctor, but a person with a PhD — have screwed this up?”
I wallowed in a comfortable disappointment hole for a while, then resolved to dig even deeper into my taxes. I hoped that I could tunnel my way through disappointment and pop out somewhere far away, perhaps a little happier from having learned something new. I started by digging through the story of the ever-frustrating Free File Fillable Forms.
Free File Fillable Forms was created in 2009 by a group of tax-prep companies (including Intuit, the company behind TurboTax) and their organizing nonprofit: the Free File Alliance. The Free File Alliance, also known as Free File Inc., began as a 501(c)(3) nonprofit. (The (3) distinction implies that the organization “may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.”)
Back in 2002, the Free File Alliance entered into an agreement with the IRS to help encourage more people to e-file their taxes. In return, the IRS promised not to encroach on the tax-prep companies’ business. By 2005, free e-filing had begun to take off. But the Free File Alliance and the IRS realized that free-for-all e-filing software would put some tax-prep companies at financial risk, so they signed a new deal in which the companies would offer the free software to most — but not all — taxpayers. That way, the companies could continue to operate on revenue from higher-grossing taxpayers.
A class-action lawsuit was filed against the Free File Alliance for its decision but the judge dismissed claims of antitrust violations, saying that restricting free e-filing to a portion of the population was consistent with the IRS’ intentions (thereby implying immunity to any antitrust allegations). A 2016 report from Senator Elizabeth Warren’s office accused the IRS of bowing to industry demands and allowing the Free File Alliance to monopolize tax prep. The report raised fundamental questions about the role of the IRS in preparing individuals’ taxes. The authors of the report also pointed to other countries where the government pre-fills your tax return for you. They referenced statements going back as far as Ronald Reagan’s presidency in support of the idea that pre-filled returns — or even a system with entirely return-free filing — could be implemented right here in the U.S.
I dug deeper, trying to learn more about the shady characters and backroom dealings of tax season. I wanted to blame someone and the Free File Alliance was a tempting choice. I wondered how the alliance could stand by its mission of “IRS electronic filing advocacy” while Senator Warren’s office blasted the Free File program as a “failure” and journalists called TurboTax an “evil parasite”. It didn’t help that the Free File Alliance headquarters were located in a shack in rural Virginia, a perfectly unassuming haven for exerting political influence. (It’s the little yellow building in back.)
In recent years, the Free File Alliance even reclassified itself as a 501(c)(4) “social welfare” nonprofit, tacitly acknowledging that the rules of the game had changed. The organization’s advocacy budget increased tenfold. It seemed like both sides of the argument were entrenched and the more I read about the whole struggle, the more difficult it became to pick sides.
But back to me. It’s one year later and I’m considering my options for e-filing my 2018 taxes. While it’s interesting, all this rabbit-hole research doesn’t help me to get my taxes done. (And that’s the goal, right?) This year, I had some changes to my tax situation that I wasn’t sure about but I still went ahead and created my annual Free File Fillable Forms account. I attempted to follow the IRS’ instructions and a few hours later, I was staring at an estimate of our taxes due. Previous experience had taught me to always regard my first tax number as an estimate. And this time, it didn’t look good. We owed. So I turned to TurboTax Online for a second opinion.
I’d used TurboTax a few times before. In the final stages of e-filing with TurboTax, the company offers a PDF summary for your records. I love this offering because for me, tax prep is an annual marriage of two ever-changing entities: my life and the U.S. tax code. The TurboTax PDF gives me a snapshot of that brief marriage and I like that I can turn my TurboTax PDF into the next year’s template for free e-filing with Free File Fillable Forms.
I thought I might be able to trick this year’s software into giving me the PDF summary for free but the makers of TurboTax are not stupid. Most of their product’s value is contained in that PDF, and in their ability to collect and transmit personal and financial data quickly. Fortunately, my wife forwarded an email from her company with a TurboTax service code so I was able to finish the return and access the PDF without pulling out my credit card.
My tax return is pretty much complete now — or at least I think it is. Maybe. But I’m still disappointed by this year’s experience. For the past two years, I stubbornly believed that tax prep should be utterly free, only requiring a clear mind and a little bit of my time. I believed — and still believe — that everyone should e-file their taxes. Why ship paper when you can ship electrons?
As I worked through the pages of TurboTax, one page really stuck with me. In the self-employment section (where I found myself poking around thanks to my recent decision to take writing more seriously), TurboTax said, “There are thousands of industries, but only one you. Good thing we know both.”
“You don’t know me!” I thought indignantly, unable to recall the pop culture reference for that line. But the more I think about it, the more I realize that TurboTax does know me. The company has multiple snapshots of my personal and financial data stored on servers somewhere. It knows where I’ve lived, where I’ve worked, and the names of my wife and daughter. It has a better memory for those details than some of my friends. So why was it still so disappointing to use this year?
Because, I realized, I don’t know the algorithm.
If tax preparation is a marriage, using TurboTax is like hiring a robot to officiate at the wedding. I don’t want a robot to preside over this important ritual anymore. I want a human with a personal connection to both me and the U.S. tax code.
I can tell TurboTax is trying hard to change my perception of its system by making its software into a game and using casual language. (“Kaching! You qualified for a deduction.”) They’ve also rolled out gimmicky new TurboTax “Live” features which put you face-to-virtual face with a certified tax professional, but I won’t bite. These days, I’m intrigued when I hear that so-and-so friend has a tax guy or a tax girl that he likes.
Before I banish taxes from my mind this year, I’ll take one last mental jab at Paul Ryan and his legislative forbears for making the U.S. tax code so complex that it requires an accounting degree to decipher, giving rise to the whole tax preparation industry in the first place. Then I’ll exhale and accept that the world is complex. I’ll attempt to internalize Einstein’s wise statement: “Everything should be made as simple as possible but not simpler.” I won’t stubbornly wish for simpler returns anymore. Instead, I will pay a flesh-and-blood tax professional.