Wait, Why Are We Paying Turbo Tax Again?

The New York Times ponders:

When a taxpayer files electronically through TurboTax, the information goes first to Intuit’s data center, where the file is batched with others and then sent to I.R.S. computers. The process is almost instantaneous, the company said — when everything goes right. “We are just the transmitter of the return,” said Julie Miller, a spokeswoman for the Intuit TurboTax unit. “In the middle there are no additional steps we are taking.”

So that raises the question: Why is there a need for an intermediary? The Internet’s greatest impact on business has been to cut out the middle step and thereby cut the cost of the product or service. In this case, transmitting electrons over the Internet costs consumers several times as much as mailing the bulky return. (There is a benefit to the taxpayer for using the Internet; sending it electronically, if coupled with direct deposit of the refund, cuts the waiting time for the refund to less than 14 days.)

Chuck Schumer, the Senator from New York who isn’t Hillary Clinton, is having none of it:

But Senator Charles E. Schumer, the New York Democrat, said the Free File program should be expanded to all taxpayers. He noted that fees were not imposed on taxpayers who filed by paper, even though that cost the I.R.S. far more to process than an electronic file, $2.65 versus 29 cents. Fewer errors occur in electronic filings as well — 1 in 100 compared with 1 in 5 for paper returns.

“The software glitch that prevented many Americans from filing their taxes on the 11th hour of tax day is bad business brought on by bad public policy,” Mr. Schumer said. “The I.R.S. should be moving toward a free e-filing system for all Americans, not using a handful of preparers and software companies to get its work done.”

Well, Chuck, we’d have to agree. According to the NYT, the free filing program open to 70% of taxpayers (those with adjusted gross income under $52,000) is just part of an agreement to keep direct filing from happening:

Under a 2005 agreement that lasts for four years, certain tax preparers, including the two big tax software companies, agreed to take part in the Free File program as long as the I.R.S. did not allow direct filing.

That’s just so 1998. —MEGHANN MARCO

TurboTax Software Slows Just as the Big Deadline Nears [NYT]
(Photo: Lazy Lightning)