TurboTax Under Pressure Over Tax Breaks

TurboTax is facing renewed questions from lawmakers over how it spent tens of millions of dollars in tax breaks.

U.S. Senators Elizabeth Warren (MA), Richard Blumenthal (CT) and Bernie Sanders (VT), along with Representative Katie Porter (CA), sent a letter to Intuit, the parent company of TurboTax, on January 31. It asked the company to explain how it used $94 million in federal research and experimentation credits, which are meant to be used to support a company undertaking research it otherwise may not have been able to complete.

The battle between the company and lawmakers comes as the Internal Revenue Service (IRS) launches a pilot of its Direct File program, which TurboTax has been vigorously opposed to. Direct File will offer a free way to submit taxes for U.S. workers, with the government agency publishing its plans in December 2023.

This is the second letter sent by the group of lawmakers, the first being sent on January 2.

Warren, who has been a frontline advocate for simplifying tax structures and ensuring free access to tax filing, has argued that a free tax filing system from the U.S. government is a better use for the funds.

She told Newsweek: "American taxpayers gave Intuit $94 million in research tax breaks in a single year—enough to provide a free filing program for millions—but Intuit refuses to answer questions about how that money was spent. If Intuit can't answer basic questions, why should we trust them to file people's taxes?" Newsweek has contacted Inuit for comment via email.

"As the maker of TurboTax, Intuit has been one of the fiercest—and most shameless— opponents of free and simple tax filing for Americans," the January 2 letter to Intuit read. "With the money that the federal government used to subsidize Intuit's research, the IRS could have offered free, online tax filing to millions of Americans."

Warren, Sanders, Blumenthal, and Porter want to know specifically how much Inuit spent between 2018 and 2023 on cybersecurity, software improvements, advertising and other areas. In the January 2 letter, they requested the "full accounting of the expenses underlying the company's massive federal research tax breaks".

Inuit responded to the letter, writing "our research and development expenses are well documented in our SEC filings."

The company also criticized the IRS Direct File program. "A government-run tax preparation system is a solution in search of a problem," the letter reads. "Most Americans don't want the tax collector and enforcer to also serve as the tax preparer."

The January 31 letter from lawmakers accuses Inuit of "obfuscation and untruthfulness."

"The American public deserves answers—not more deception—about how you are spending their hard-earned dollars," it reads. They have requested a response from Inuit by February 7.