Reply All - #144 Dark Pattern

Episode Date: June 27, 2019

This week, we discover an invisible maze, designed to trick millions of people out of their money. Justin Elliot’s Twitter Pro Publica’s questionnaire for people who’ve worked at Intuit Intuit CEO’s video response Find a Free File tax product on the IRS site Pro Publica’s reporting on Turbo Tax Here’s How TurboTax Just Tricked You Into Paying to File Your Taxes TurboTax Deliberately Hid Its Free File Page From Search Engines TurboTax and H&R Block Saw Free Tax Filing as a Threat — and Gutted It Elizabeth Warren and Other Senators Call for Refunds and Investigations of TurboTax and H&R Block Learn more about your ad choices. Visit podcastchoices.com/adchoices

From Gimlet, this is Reply All. I'm PJ Vote. So my absolute favorite TV show of all time is this prank show called Nathan for you. My name is Nathan Fielder, and I graduated from one of Canada's top business schools with really good grades. So Nathan claims to be this brilliant business consultant, but really every single time he shows up to help, he has these suggestions that are just comedic, absurd, and completely morally bankrupt. So my favorite episode is the gas station episode. Nathan tells the owner of this gas station that he's going to get him way more business

and the way they're going to do it is that for one day only, gas is going to be 175. A buck 75 with a rebate. A rebate that has to be hand delivered to a box at an extremely remote location. About an hour and a half drive

from Savon Gas in the middle of the Angeles National Forest, the peak of Mount Chileo is only accessible by foot. There are diehard to actually take him up on this. And what they learn when they get there, is that even then, to find the rebate box, they're going to have to solve a series of riddles.

I've been resting for a million years, but I never sleep. I'm a kind of music, but out here, I do not make a peep. Wind. Is it the wind? Is it wind? It is not wind. Rock. Yes. Great.

Okay. All right. So the next riddle is under a rock. It's a multiple day camping trip. They sleep in tents overnight. And at the end, they all go home without having gotten their $15 back. I think the reason I keep coming back to the show is because I feel like it distills down to its purest form, this thing that you run into so often in the real world.

Just these unsolvable, horrible mazes of capitalism where friendly, smiling people trick you out of your money. Lately, I've been talking to this reporter who has actually uncovered one of these mazes in real life. But the maze he found it was just so much bigger. It trapped so many more people. I know this is not a quantifiable number, but how many people do you think have fallen for this without even realizing there's something to fall for? So we are trying to figure out that number.

It's almost certainly in the hundreds of thousands are probably millions. So that's Justin Elliott. He's a reporter at ProPublica. And for the past several months, he's been investigating into it, the company that makes turbotax. And since I talked to him, everyone I run into, like friends, strangers, people at the doctor's office, I ask the same questions.

Did you use TurboTax to file your taxes? And if so, was it free or did you pay money? Pretty much everyone paid money and almost none of them should have. They got Nathan reviewed. The maze they fell into, a maze that was completely invisible to them, it exists because of this very weird deal that the government made with private industry 16 years ago. The kind of deal that is very hard to imagine happening anywhere else but in America. All right, so to explain, we need to go back to this press conference back in 2003, the Bush era. I'm Mark Foreman.

I'm associate director for IT&E government at the Office of Management and Budget. He's here with some very big news for U.S. taxpayers. Americans are finally going to be able to easily file their taxes via computer. I'm very excited about the launch of the free-file website. It's really the embodiment of 24 presidential e-government initiatives that were released. Okay, it's IRS exciting, not real-world exciting. But this was actually a big deal. When I took my job 18 months ago, virtually every other major country in the world

had the ability for citizens to go online and freely file their taxes, easily file their taxes. We didn't. Up until then, most U.S. taxpayers had been either filing their taxes by mail or over the phone. Now we were finally catching up to basically every other major country in the world. Except in those other countries, what happened was their governments just built their own file your taxes for free websites. The IRS did not think we could pull that off. They thought it was going to be too expensive, and they felt like we were too far behind already. And so here is what they decided to do instead.

They went to 17 different companies, companies that were already making online tax filing service. And they told them, you guys are going to do this. Americans will not file their taxes online directly to the IRS. They will file them through you. And for the vast majority of Americans who do that, you're going to provide those tax filing services completely for free. And the companies agreed to do it. This is a tax industry lobbyist at that same press conference.

Today, for the first time, more than 60% of all U.S. taxpayers will be able to, for free, prepare and file their taxes online. We are particularly very proud of the coverage of so many low and moderate income Americans by this program. Back then, the bottom 60% of U.S. tax filers were eligible. Today, it's actually the bottom 70%. People who make $66,000 a year or less. The pitch for this free file program was basically that this was the kind of best kind of public-private partnership.

Industry was just going to offer free tax filing to a lot of people at no cost to the government. So what could go wrong? And so why would private companies be really excited to jump in and offer something free? So that's a good question. So the principal reason that this free-file deal with the IRS has been so valuable to the industry is that it contains this non-compete clause. So it contains a promise by the IRS that the IRS will never create their own system that would essentially compete with turbotax or potentially put turbotax out of business. So the IRS has made this very valuable, extremely strange promise to the industry.

They weren't going to compete with them. They would not build their own website. And in return, the industry has also made a very valuable and equally strange promise. These for-profit companies agreed to offer their services for free to the lion's share of their potential customers. So with the deal done, the companies went about the next step. Everybody picks which customers they're going to not. make money off of. Some companies take active duty military, others take seniors, there's a bunch of categories. And then they go about building them free tax filing products. In the years that

follow, the IRS keeps its promise. It never builds its own website. The tax companies, something very surprising happened with one particular tax company. Over the years, this company grew and grew. They made more and more and more money off of this situation that had seemed designed to stop them from profiting. That company is Intuit. Intuit's a Silicon Valley company. I believe they're headquarters in Mountain View is like right next to Google. Got it. Founded in the 1980s actually as personal computers were rising, the founder, this guy Scott Cook had an idea to create accounting software for personal computers. So they make QuickBooks. Yeah. They used to be Quicken. Yes. Got it. That's the business they started and that's still a big part of their business. And then I believe in the early 90s, they acquired a company that made tax software. And that became what is now turbotax. TurboTax has made tons of money for Into It. Roughly $2 billion in revenue last year. Scott Cook is now a billionaire. His adult children are equestrians. Their day job is that they just are equestrians? I don't know if it's a job.

Their hobby? I'm not sure if they work actually. they've done very well. One thing that's worth saying, Intuit software is really good. Like, everyone I know who doesn't use an accountant or have their parents do their taxes uses it. It's easy, it's pretty, it gets better year after year. However, that is not what is created a fortune for an elusive billionaire and his equestrian children. Because remember, the service is supposed to be free for most Americans. So how did Intuit make money off of free?

They do offer the free tax selling product that the deal set. they had to. Their version services active duty military making under $66,000, as well as civilians who make $34,000 a year or less. That's the group of free customers they ended up with. But they've taken that product, and they've hidden it at the end of a maze. They don't make people hike a mountain or answer a series of riddles, but they've made it so that it is almost impossible to find. It starts just with how the thing is named. It actually sort of has two names. TurboTex Free File, which for some reason they have also branded as TurboTex Freedom, they're the same thing, though?

TurboTex Free File and TurboTex Freedom are the exact same thing. Justin showed it to me. Okay, so this is it. This is the actual Free File website. Yeah, exactly, which is virtually identical to the normal TurboTex. It's nice. It's like light blue background. There's a cheerful clip art guy who's saying, let's start with your personal info.

We'll gather some basic info about you and the people in your life. And this, if I use this program, it would really, really actually let me file my taxes for free. Right. You could follow this through the end. and as long as you made under the income cap, this would truly be free. So that's the website that Intuit, because of their agreement with the government, has to offer. However, there's no rule banning them from coming up with their own extremely similarly named product that any reasonable person would confuse with free file.

And that is TurboTax free. Which is the product that the company has thrown huge advertising dollars at. They have ads where literally all the actors in different situations are just, saying the word free over and over again. The only most famous one this year was like a kid at a spelling bee. Can I actually? Yeah, sure. Free.

Free, free. It's literally just a spelling bee where they only say the word free. I didn't know this, but during tax season, TurboTax spends almost $100 million on TV at the loan. This is one of the things they bought this year. Free? Free. Free. Free, free. That's right. TurboTax free is free.

Free, free, free, free. It has like five million views or something, I think. Seven million. Oh, seven million. The product they're advertising, is that the free version? It depends. If you're feeling confused right now, don't worry, that is absolutely the point. Everything you're about to hear from here on out is incredibly confluited.

It has been designed that way. Because this is a story about people making money by being convoluted on purpose. It is taken not just Justin, but a team of journalists at ProPublica, aided by whistleblowers within Intuit months to untangle what's going on here. Okay, wait, so there's free file, there's freedom, and there's free. Free, TurboTex, free file, and TurboTex free, different products. Very different products. Okay.

Well, the software is virtually identical, but whether it's free or not is very different. Even though they all have free in their name. Even though they all have, like, the letters, F-R-E-E in there. They've created this taxonomy of the word free that makes it virtually impossible to talk or write about in a clear way. It's actually been very challenging to write. about because like how do you use the word free? All right. TurboTax free file slash turbotex freedom. Those are the ones that if you're eligible to use them, they're always free. TurboTax free, despite what all the ads say, is only free under very specific circumstances.

It's free if you have what Intuit calls simple tax forms. Like if you turn in just a W2, that's simple. Here are people whose taxes, according to Intuit, are not simple. Freelancers, anybody filing forms for student loans, mortgage interest, child care costs. Basically, most people who require any kind of second form will learn that their taxes are not simple, which means they'll end up paying somewhere between 60 and 200 bucks for their free tax filing. And Justice said that their website is designed to push you into TurboTax rate, whether you should be there or not. Imagine yourself in, you know, April 10th, and I just go to turbotax.com. Okay, so the first thing it says is free guaranteed, zero dollars federal, zero.

$0 state, $0 to file, easily and accurately file your simple tax returns for free, on caps, see why it's free. And then there's a- Right, there's a picture of like a smiling woman holding, looks like she got like a $3,100 refund, which I've never gotten. Yeah, and she has a new iPad that is displaying it. She looks super happy. Right. So, in a way, just to be asking through, if I click CY, it's free, it says, is term tax-free edition really free? Yes, we guarantee you'll pay nothing to file your simple federal and state taxes. The word simple is doing a lot of work there.

Right. So if you have other forms, TurboTax will tell you at the end of the process where you've gone through after clicking free, that actually you have to pay for TurboTex Deluxe or TurboTax Premier in order to file. And they do that once you're done. They do it towards the very end, yeah. Meanwhile, TurboTax free file, the one that is income-based, the one that doesn't care how complicated your forms are, there's no. mention of it on the homepage. Even if you scroll all the way to the bottom, see, there's a whole list of products. I think it says like TurboTax free edition, Deluxe, Premier, self-employed, military tax rep, all TurboTex live products, live basic,

live Deluxe, live Premier, live self-employed. There's like 16 things on there with the notable exception of TurboTax free file. God. So Justin and his team figured that's fine. We'll just find this thing using Google. We decided to play the role of somebody who's even more of a tax nerd. who not only knows about IRS free file, but actually literally knows the brand name of the TurboTax Free File Edition, which is TurboTax FreeDum. Yeah.

So we Google TurboTax Freedom, right? And almost the entire page, when you Google this, is a series of ads, and the top one is TurboTax Free File Program. Right? So we're like, okay, great, we're in luck. Finally, we, like, found this sort of whole thing. Holy Grail. They thought they found the Holy Grail, but what Google actually took them to was not really the TurboTax Free File website. It was like a trick door in front of the free file website. So there's two buttons on this page. There's an orange button and a blue button. And can you read what they say? Yeah. So the orange button says, see if you qualify. Yeah. And then the blue button says, start for free. Right. So which would you click? Oh, definitely start for free. Also just because it's the blue button. Exactly. And also it gets even more interesting. If you look at the little text above it, the Start for Free text says, like, we'll find the perfect product for you. You can tell me. Yeah. So Star for Free says, we're here to help you get your taxes done right. Starting with the perfect TurboTex product for you. And then the C if you qualify as like, 2018, TurboTex Free File Program Qualifications. You earn $34,000 or less, or less, or if you qualify for the earned income credit EISA. Right. So just Paul.A. Or less, you're in $34,000 or less, or if you qualify for the earned income credit EISA.

Right. So just pausing on that for a second, the see-if-you-qualify button is throwing around terms like adjusted gross income. Again, no normal person knows what that is. Or you can click the nice blue button, which also has a smiling mother with her child on her shoulders next to it. The nice blue button, which has the word free on it. So it turns out that if you click the blue free button, that is actually another off-ramp to the not the free file edition, but the free edition. in which depending on your forms, you're going to have to pay. Oh, my God. Oh, my God. It's just like there should be, it's fine for companies to try to trick you, but there should be like one safe road. Yeah. After the break, what happens if you try to get your money back?

So all the nudges and skull dougary that Intuit uses to push people away from free file towards paying the money, Justin told me there's a term for all that. It's called a dark pattern. Whether you realize it or not, you have probably run into a bunch of things. these. It's when you use a website or a piece of software that is designed through all sorts of sneaky ways to lead you to a choice that you probably don't want to make. Unsubscribe buttons hidden in 4 point grade out font, that's a dark pattern. Apps that get you to accidentally pay for a monthly subscription by putting the OK button where your finger expects to find the cancel

button, dark pattern. But the dark patterns swirling around turbotax are much more diabolical. Like, there was this one thing Justin couldn't figure out. He actually found this one way to get to the turbotax free file website. It turned out there was a directory on IRS.gov that had a link to it. But he didn't understand why he couldn't just get to the turbotax free file website directly from Google. No matter what we Google, turbotax free file edition, turbotax freedom, turbotax IRS free file, the actual turbotax free file edition was never appearing, never.

Huh. Like not on the first page, not on the fifth pitch. So we're like, what is going on there? So after we published one of our early stories, some SEO experts on the internet flagged for us that TurboTax Intuit had actually added code to the TurboTax free file website telling Google not to show that page ever. Robots.com. A robots tag. Which just says, like, you put it on a website if you're like, Google, don't index this. Yes.

One of the things that was striking to us about this hiding the free file page from Google was that it really clearly speaks to intent, right? This is not a passive thing. Like, well, we put, you know, we have a certain number of advertising dollars and we're putting them mostly towards the free edition instead of the free file edition. This is literally something that you have to actively add. It's not the default. Yeah. So they, somebody at Intuit, actively put code on the page. saying don't appear on Google.

If Justin's right, and Intuit was hiding the free file program on purpose, it seems to have worked. Remember, 70% of Americans are eligible for those. In 2005, soon after the program was launched, 5.1 million people tried it. Last year, that number was down to around 2.7 million. And Justin says he's talked to people who work it, Intuit. Some of them contacted him because they're so disturbed about how things are run. One person told him a story about this meeting they'd gone to, where a naive soul had made a suggestion.

They pointed out that once TurboTax knew their customer's income level, they just put a pop-up in front of them that routed them to the free file software. Justin said that person got laughed out of the room. It was like the person who shows up at the carnival and suggests fixing the claw machines so that people can grab the toys more easily. You know, it would undermine the entire business model. This is a very lucrative business. Sasan, the CEO, made like $12 million last year,

And that was before he was even CEO. I think the CEO made $20 million. Oh, my God. But also it's sort of crazy because even if they were like, okay, we're only responsible for helping people who are making like less than $34,000. Yeah. There's still tons of people that they could profit off of. Yeah. But when you look at the, we don't know the sort of income distribution of Intuit's customers, but we do know the income distribution of the country.

And so turns out something like a quarter of the country, it makes under 30,000. $34,000. So if all those people started really using the free file product, it would erase a huge chunk, if not all, of their profits. Thank you for calling TurboTax. Your call may be monitored and recorded. After Justin started publishing these stories, a lot of his readers started calling TurboTax and saying, give me my money back. This call was recorded last month by a guy in Virginia who made about $16,000 last year. I'm calling to request a refund on the services that I paid for, but I should have been able to do the free to file, but I was directed to the free addition for TurboTaxe not buying my taxes. Give me a moment. For about a week, it worked. I was getting a whole series of very gratifying emails from people who make $15,000, who got their $150,000 back and were very happy.

And then the company shut it down. They set up a whole special sort of customer service SWAT team. It was actually called the ProPublica team. Oh my gosh. That's kind of flattering. Yeah. This new customer service SWAT team, they were very, very good at not giving people refunds. And they basically had one tactic.

So more confusion. We are going to have to pull up a screen share because the Freedom Edition is through the IRS. Free file is through us. Is that true? Not really. Okay. But it gets worse. Okay.

Okay. I can tell you that through us, it is forms that are needed. Through the IRS, it is income-based. So we are not able to grant your refund, but I can point out your forms to you on what forms might have bumped you into a higher product. So that's not my understanding for free to file if you made a file. if you made under a certain level of income. That is free to my opinion. Okay.

But your agreement with the IRS is that under a certain level of income, you're allowed to file for free. You would have to use that product. Okay. That's what I intended to use, but because, and I'm finding out through ProPublica articles now, that TurboTax is intentionally making those very difficult to find or use. We are not making them difficult to find.

There's coding literally. to say that it's not going to show up in search engines. And I guarantee you read that on the public site, didn't you? I really did. Yeah, they're not going to be honest about that stuff. Because we have no power over Google or anything like that. It is up to the IRS on how they want to advertise that, if they want to advertise it at all. Do you think that this agent is intentionally lying or confused?

I think probably, I think actually this agent is just confused. But this was not isolated. I mean, we heard from like at least 20 people who were told by agents that ProPublica was fake news. But the core thing the agent's getting wrong here is that he keeps talking about the IRS running TurboTax free file, which is, which is not true. very far from the truth. And there's sort of an irony there because Intuit has lobbied for years to make sure the government has nothing to do with tax filing. Intuit couldn't make anyone available for an interview with us for this piece. Their spokesman did point out over email that they have gotten rid of the confusing freedom brand name. Free file, it's just called Free File now.

He didn't answer any questions about their search practices, but since Justin's stories came out, it is now possible to find TurboTax Free File using Google. Ultimately, though, while they've made some changes, the company believes that they've done nothing wrong. I want you to know that I take these challenges personally, and I know you do too. And I want you to hear our story directly from me. This is Sasan Gadarzi. He's the CEO of Inuit. He's addressing the company in an internal video rebutting ProPublicas reporting. Over the past five years, tens of millions of consumers filed their taxes for free using one of our free offerings.

That is more than every tax prep company combined. Justin said he reached out to Intuit for clarification on what they meant by free, like really free or used a free service but paid something for it. He hasn't heard back. Anyway, Godarty says everything the company did that Justin said was meant to confuse people was actually meant to help them. He says delisting pages from Google is something businesses do all the time. Having pages not rank is standard internet practice.

And it's especially helpful in this instance where our primary goal is to get people the right product through educational content. It feels like the real reason he's there is just that he has to rally into its 9,000 employees. Like, people have just been told that their business is amoral. And he tells them, the real enemy here is pro-publica. Each of these articles have been written and published in the context of a specific wider political agenda.

That agenda is to create a centralized government system of pre-filled tax returns. What he's saying is basically the unsaid argument. at the center of this whole free-file, public-private, strange arrangement. This arrangement has lasted almost two decades. What he's saying is that you cannot trust the government to handle your taxes. They're going to screw it up. They're going to rip you off.

It'll never work. And it's hard to argue with that because we've never tried it. But when Justin started tweeting out links to his articles about this, he heard from an unexpected audience, international readers, who were tweeting at him saying things like, I fundamentally do not understand the problem you're writing about. I've heard from people from other countries who are literally confused by the idea of like, what does it even mean to do your taxes and also pay money for it?

That's confusing. In Australia, we, you know, it takes like 10 seconds and that kind of thing. It's such a weird, like, bong hit of an idea. They're just like, don't know what that is. Okay, I'm looking at the tweet thread now. So it's like Japan, employees don't have to file a tax return. UK, I don't have to file tags as my employer is required

to do this for me monthly and I only have one source of income. Australia, done electronically, almost entirely pre-populated by the government. Netherlands, five to ten minutes. Somebody from Slovenia deleted their tweets so I don't know what's going on there.

Philippines, employer does it for me. South Africa, online systems pre-populated. Mexico, it's free, 20 minutes. But yeah, it's not just the fancy countries that always do stuff better than us. Where it's like, yeah, we have PlayStation 5s in our prisons and nobody does murder.

It's everywhere. Right. In theory, we could build a similar system. Yeah, the agreement says the IRS isn't allowed to do it, but that agreement comes up for renewal every few years. We just decide to be more like Sweden or Mexico. Except we have an obstacle that those countries don't have, which is that every year, Intuit makes more money,

and that gives them more money to spend lobbying to ensure that lawmakers keep the agreement the way it is. In fact, this year they went a step further. In April, they got language inserted into this bill called the Taxpayer First Act. It made the arrangement permanent. Got the IRS's non-compete put into a bill. All right, last week, the House passed the Taxpayer First Act of 2019 with bipartisan support.

It has a provision that would make it illegal for the IRS to launch its own free online tax filing system. The bill passed the Democratic House, went over to the Republican Senate, where everybody knew what was going to happen next. It was a done deal. This is a bipartisan bill that passed with broad support in the House. probably have the same effect in the Senate, and then Trump will sign it, of course. But that's not what happened. What happened was that the ProPublica stories came out.

People got mad, and the Senate did this thing nobody expected. They rewrote the bill. They took out the part permanently banning the IRS from making their own software. Were you surprised to see that happen? Yes, actually, because usually journalism has no effect. So, yeah, we were surprised. But basically all that means is that it's just sort of status quo ante.

It's not like ending the program or anything. It's just not putting it into law. So we're in this weird place where, on the one hand, at any moment, the IRS could decide, screw this agreement, we're making our own website. On the other hand, it feels like that will never happen. And so we live in this status quo. Next spring, we'll all sit down to file our taxes. And we'll take information that in most cases the government already has,

how much money our employer pays us. And because we don't trust the government, we will take that information and give it to a private company instead. They'll charge us some money, and then they'll turn it over to the government. Who already has it? It might seem weird. It might not make a lot of sense.

But we're Americans, and for now, that is the system we've decided on. Justin Elliott is a reporter for ProPublica. His investigation into it and to it has been done alongside a team. Lucas Waldron, Paul Kiel, Kango Tsutsumi, Ariana Tobin, and Meg Marco. If you'd like to try Free File, there's a link to it on our show notes. And Justin says if anyone at Intuit hears this and wants to talk to him, his email is Justin at ProPubliclet.org.

Reply-all is hosted by me, PJ Vote, and Alex Goldman. The show is produced by Shruthy Permanani, Fia Bannon, Damiano Marquetti, Anna Foli, Jessica Young, and Emmanuel Jochi. Our editor is Tim Howard. We're mixed by Rick Kwan, backchecking this week by Michelle Harris. Our intern is Emily Rostek. Special thanks this week to Joe Bankman, Mark Foreman, Brad Bass, and Jeff Kupfer. Our theme song is by the mysterious breakmaster cylinder.

Matt Lieber is an early morning bike ride. You can listen to our show on Spotify or wherever you get your podcasts. Thanks for listening. We'll see you in two weeks.