TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, November 15, 2007

$1 Billion Class Action Lawsuit Filed Against TurboTax, TaxCut, and Free File Alliance

A Phialdelphia law firm on Monday filed a class action lawsuit in federal district court in Pennsylvania seeking over $1 billion in damages against the Free File Alliance and several of its members (including Intuit (maker of the TurboTax tax preparation software) and H&R Block (maker of TaxCut)) on behalf of the 70 million taxpayers with incomes over $52,000 who e-filed their tax returns.  From The Legal Intelligencer:

The complaint was brought under the Federal User Charge Statute and alleges that the alliance members charged fees solely based on their private business interests and not on the value to the taxpayer and the public policy interest served. The sole count of the complaint was for restitution of fees charged for electronic tax filing in violation of the Independent Offices Appropriation Act. ...

"The name 'Free File Alliance' is clearly misleading," [Feldman, Shepherd, Wohlgelernter, Tanner & Weinstock] attorney Thomas More Marrone said in a statement. "Few taxpayers are actually eligible for free electronic filing. E-filing has become an enormous profit center for cartel members." ...

"This agreement wrongfully 'privatized' the IRS' quintessential government task of developing, receiving, collecting and processing tax returns, allowing [alliance] members to reap profits by charging taxpayers and tax preparers substantial and legally unauthorized fees to electronically filed returns with the IRS," the complaint alleges. Marrone said the proposed class calls into question all fees associated with e-filing, including the fees to file and the cost of purchasing the software for tax return preparation.

A spokesman for the alliance, Patrick Dorton, said in a statement that the lawsuit was without merit. ... "The Free File Alliance, which has been authorized and approved by the IRS and Congress, is a pro-consumer public-private partnership that has allowed more than 17 million taxpayers, most with low and moderate incomes, to file tax returns at no charge," Dorton said. "It has been a win for taxpayers and a win for consumers."

http://taxprof.typepad.com/taxprof_blog/2007/11/1-billion-class.html

New Cases | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef00e54f83af4b8833

Listed below are links to weblogs that reference $1 Billion Class Action Lawsuit Filed Against TurboTax, TaxCut, and Free File Alliance:

» Tax e-filing class action from Overlawyered
Philadelphia law firm Feldman, Shepherd, Wohlgelernter, Tanner & Weinstock wants $1 billion from members of an income tax software group, Free File Alliance, including H&R Block and Intuit (Gina Passarella, "Tax Preparers Face Proposed Billion-Dollar... [Read More]

Tracked on Nov 17, 2007 10:13:45 PM

Comments

I'm confused about what the complaint is. Does this Independent Offices Appropriation Act not allow turbotax and the like to charge what they want for offering their services?

Posted by: Chris | Nov 15, 2007 12:11:29 PM

This is drivel, another way for a few attorneys to collect a boatload of money in my name. I don't care about paying a small fee for that service. If it's wrong let the IRS regulate it or courts oversee it. Don't let some fatcat lawyers collect $1BN and raise the cost of the software in the long run. We will end up paying more in the long run just like most class actions.

Posted by: Tom | Nov 15, 2007 1:41:19 PM

Great! Another get-rich-quick scheme for lawyers. If I join the suit, can I expect something more than a check for a dime? While the lawyers make tens or hundreds of millions?

Posted by: Dr. K | Nov 15, 2007 3:48:38 PM

With absolutely no idea of what I'm talking about - i.e.: I haven't done a lot of research into e-filing, since I've used the services of a tax acountant for the last seven years because of complexity - I'll say that I'm inclined to believe the premise of the suit.

Without a lot of work to prevent it, I don't see why the IRS never developed the 1040 and major schedules in PDF "forms" format for download and upload by individual taxpayers, instead relying on an external network.

Posted by: bud | Nov 15, 2007 4:36:15 PM

Has there ever been a class action lawsuit that gave the people that have actually been harmed more than a soda and a candy bar? Seems that every class action suit I've seen killed a business, hurt those helped by that business and did nothing for those harmed.

Posted by: Peter | Nov 15, 2007 5:07:19 PM

Yet another example of Lawyers trying to get rich.
They will get millions and millions. What will the people get? A coupon good for some free tax filing.

And they wonder why people tell lawyer jokes.

Posted by: Dan Hamilton | Nov 15, 2007 8:16:47 PM

The current tax code is BS to begin with... move to a 13% flat tax and this "problem" is solved.

Posted by: Free me from Taxes | Nov 16, 2007 4:02:26 AM

Marrone said the proposed class calls into question all fees associated with e-filing, including the fees to file and the cost of purchasing the software for tax return preparation.

Erm, I bought tax prep software, because I deemed that it had value to me as a commodity on the marketplace. On the other hand, I chose not to e-file because in that case I didn't see the value. Isn't this what a "marketplace" is for?

Oh, no, I forgot! (** slaps himself on the forehead **) A "marketplace" is where lawyers go to shop for frivolous lawsuits!

Posted by: Kepler | Nov 16, 2007 4:54:43 AM

"Without a lot of work to prevent it, I don't see why the IRS never developed the 1040 and major schedules in PDF "forms" format for download and upload by individual taxpayers, instead relying on an external network."

They did, and you can fill it out. But you'd still have to print it out and mail it. Or you can call them up and file over the phone.

Most of the complication with the e-filing is that you have to manage sessions (to allow a person to disconnect and reconnect) and establish that the person is who they claim to be. And then, of course, there's the matter of getting all this stuff right.

This is all just a good reason to get rid of the income tax.

Posted by: ben | Nov 16, 2007 6:05:00 AM