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TurboTax Freemium Funnel: Critical Analysis and UX Teardown (medium.com)
153 points by breademoji 5 months ago | hide | past | web | favorite | 89 comments



I stopped using TurboTax some years ago and switched to TaxAct as a less bad alternative. I didn’t believe them to be necessarily tons better than giving money to TurboTax, but I figured at least it wouldn’t just keep solidifying a market leader who was capturing a significant market based mostly around actively lobbying to keep it that way.

In the last two years I took a leap to CreditKarma’s tax offering. It is a bit basic and not quite as endlessly full featured, but it is simple, efficient, pretty quick and quite fast. It’s also entirely free. The first year I used it I ran my numbers in a competing product to check, I was self employed at the time, which meant my tax situation wasn’t exactly easy that year.

Anyway, the numbers lined up perfectly. So I used CreditKarma to file and have been happy with it ever since. Honestly at this point I’d pay for it, just to give them a more solid business model and development budget, but as far as I know they don’t even have a paid option!

I filed in February this year. It was easy.

I actively avoid Intuit products now.

(Though, pragmatism wins here to some degree: I did use their self-employment accounting tool for a few years even when I had switched away from their tax software. That tool makes it annoyingly easy to keep accurate books and Xero just wasn’t as good and simple at what I was looking for. If I was doing it again today, I’d definitely again look for alternatives. And frankly I think I’d find them now.)


CreditKarma did a pretty good job with my taxes this year, they just didn't handle premium tax credits very well. I had to get help filling out a form 8962, which strangely enough was full of (the equivalent of) null pointer exceptions. Not CreditKarma's fault, but hoo boy was that a nightmare of a form + instructions + worksheet (each with appendices).

I'm looking forward to them handling all these edge cases, too, so I can fully recommend them to my friends next year.


I just download the forms from the IRS and fill them out. File on paper. It's not very hard and that way nobody but the IRS has my data.


Some situations are not hard, and some are. I wouldn't make a generalization like that.


Yes, I always thought taxes were easy when I filed a 1040EZ. Then came real life... and I discovered there were probably previous deductions I should have been taking (that exceeded the standard deduction) which could have saved me thousands of dollars and weren't available on the EZ.


too bad they sell your tax information, in all likelihood to companies like Equifax. now they don't have to ask your employers your salary anymore, you can just tell them.


Do you have evidence or justification for this claim?


From their privacy policy https://www.creditkarma.com/tax/privacy:

When We Share the Information We Collect

Affiliates: We may share certain information with our affiliated companies, such as Credit Karma, to help us provide our Services and manage your account.

now, it seems fine for Credit Karma Tax to share information with Credit Karma. what exactly counts as an "affiliate" though? I mean, "affiliate marketing" is a common term, and that's pretty darn broad. I read it in the broadest terms possible, which would be "everyone we have a business relationship with", necessarily including TransUnion and probably other CRAs.


I believe affiliate has a more restrictive meaning that just "everyone we have a business relationship with" but I'm not a lawyer.


I was worried about this when I started using CreditKarma, too. Seven years of AMAs convinced me that unless the founder was a pathological liar playing a really long game, they probably didn't sell my information:

"Do you spam member or sell your list? No, we send less than one email per month. We never sell, share, or rent any consumer PII with third parties." https://www.reddit.com/r/IAmA/comments/c28od/i_started_credi...

"We make money by selling advertising on the site. We never sell or share member information" https://www.reddit.com/r/IAmA/comments/e0cfl/iama_entreprene...

"Also let me point out that we don't make money by selling your information. It is against our privacy policy and we hate those tactics as much as you do." https://www.reddit.com/r/IAmA/comments/2qq95l/i_am_the_found...

"Definitely not. We hate that model too. We do just fine by showing you offers that we believe will save you money. We think that is a win win. As a test, I always suggest people create a unique email account just for us. See if you get any spam in that account. All bets are off if you use a crappy email provider ;)" https://www.reddit.com/r/IAmA/comments/3zh78n/im_ken_lin_fou...

"We are using Google business model. We don't sell or rent the information to anyone and we use it to help find the most useful loan or credit card for you. That simple." https://www.reddit.com/r/IAmA/comments/5ha7sg/im_kenneth_lin...

"We also don't sell or share your information unless you give us explicit consent. In those cases, we are generally pre-filling a form or determining if you qualify for an offer." https://www.reddit.com/r/PersonalFinanceCanada/comments/69ad...


We often pick up a bunch of disgruntled Intuit users at https://usebx.com


I had an awful experience with TurboTax just a few days ago, and will probably never use it again. In the very beginning, it asked me to click on some some things to get a "life picture" and seemed the Free version was fine. Then I get halfway into it, and it says it can't continue unless I use Premium. When I was almost done it asked to charge extra for "audit protection" and I had a wave of anxiety sweep over me, and almost purchased that too.

It has been brought up a few times here: companies like H&R Block have lobbied to keep things complicated.

https://www.propublica.org/article/filing-taxes-could-be-fre...

Unless I have some special deductions to take care of, the government should just send me something like "we have received forms x,y,z from a,b,c. This is your AGI, what we/you owe. does this look correct?"


The ridiculous tax code isnt the fault of TT, even though they lobby to keep it that way. It's the fault of the cowards we keep sending to DC. Take it up with them.


A complicated tax code isn't the problem. The tax code can be as complicated as can be, so long as it is computed automatically by the state from the data it already receives, which is the part that Intuit is blocking.


Here in my country the "practical manual" for this tax year is 1163 pages long, but the web app of the ministry has most of your information already stored. For the vast majority of people filing taxes it's just a matter of clicking "OK" a few times.


> even though they lobby to keep it that way.

It’s continuing existence is their fault, then. If not their sole fault.


And yet whenever we try to eliminate “loopholes”, there’s some group complaining vigorously to keep that complexity. The new tax law simplified taxes for most filers by increasing the standard deduction (by eliminating exemptions).


I understand I must not be in the "most filers" camp. I still have to go through all the work to figure out if I should itemize or just take the standard deduction. The effort it takes me to do my taxes hasn't changed. I wonder how many people actually have a reduced effort vs how many save taxes?


How do you know the new tax law simplifies filing since it didn't apply to 2017?


It's pretty much guaranteed that fewer people will itemize this year.


You generally need to do the itemized calculations to see which one saves you more money. Thus, the result is kind of meaningless as you do the same work either way.

The only way to simplify taxes is to actually remove deductions.


There are really only a few things most people deduct - state taxes, property taxes, charity and mortgage interest. You have to enter your state taxes anyway. It's not that hard to enter the other three and see if you are below the standard deduction.


I (and probably the vast majority of people) don't have to do any calculations to know I'll have less than $24,000 in deductions because $24,000 is ridiculously high amount.


You can deduct state taxes which adds up. Really 24,000$ is easier to hit than you might think.


No it's really not, over 90% of Americans will claim the standard deduction this year: https://www.forbes.com/sites/ryanellis/2017/11/22/nine-in-te...

My deductions were usually only around ~$17,000 with pretty decent charitable contributions, I don't even have to think about if I'm going to itemized this year. I suspect I'm a pretty "average" itemizer.


You can only deduct 10k of state taxes starting next year


Which I think is BS for numerous reasons. A few being, the income tax is not how the federal government was supposed nor should be funded. We need appropriated funds and taxes, not a slush bucket that ebbs and flows. Also, states that want to use income taxes to take care of their citizens ought to have priority and not penalize them. Encouraging subunits to be responsible for their needs is a good thing. Decentralizing services is beneficial by design, even if not as efficient. The US is huge and the needs of the states are so diverse we should leave it to the states to address their own needs.


Whoever told you that is a moron. The new tax changes go into effect for 2018. Fewer itemizers for 2017 taxes has nothing to do with the changes to the tax code.


I guess my statement as made is ambiguous, but I wouldn't have said "this year" if I meant 2017 taxes.


Ok. Granted fewer people will itemize in 2018. And so what? I don't think TT has a stranglehold on the industry because people worry about their itemizations. In other words, I don't expect TT to have fewer users and less revenue for 2018 returns. No one is going to say "the standard deduction makes sense for me...I no longer need turbo tax"


Well they should. If you don't even need to itemize you should just fill out the forms from the IRS. If you can do some simple addition and subtraction it's not difficult. Probably just as fast if not faster than being interviewed by your tax program.


But why? I mean we're in a forum if tech nerds and people are seriously advocating filling out a form and doing calculations manually?

You're missing the feature where your information is carried over year to year and all the forms you get can be automatically parsed. "Doing your taxes" with current software can be as simple as uploading a few PDFs and clicking next a bunch of times.


If you use TurboTax every year it carries over a lot of information each time.


The simplest tax code isn't necessarily the fairest.


Post-citizens United, it’s the corporations.


Corporations don’t file a 1040.


Corporations like Intuit TurboTax spend millions of dollars of the money you give them to loby the government and keep the system so convoluted that you need them to do your taxes.


This is more a meme than a reality. I'm sure that they do spend money to protect their business but it's a bit silly to think that they have a measurable effect on the tax code complexity compared to the money that comes from other special interests. People with simple tax situations could very easily full out the forms from the IRS. The 1040ez lives up to it's name -- doing it with software is in most cases just more convenient. And people with complicated tax situations have a tax accountant.

There's a middle ground with upper middle incomes and small businesses which have somewhat reasonably nontrivial tax code that applies. In the absence of software they would probably be pushed the accountant route. Generally people want this complexity because they pay less compared to proposed simpler systems.


It's not about the tax code complexity. It's about the government having a system in place to use the information it already has to automatically complete your taxes if you have a simpler tax return. This happens in a lot of other countries and, having lived in one where this happens, is much better.

Intuit lobbys to stop this happening because they know a lot of people don't have complex returns and if the government automatically calculates basic returns it would wipe out a large portion of their customer base.

https://www.propublica.org/article/filing-taxes-could-be-fre...


TurboTax is the worst and they'll squeeze you any way they can.


This might not apply to many who frequent HN, but not enough people know about Free File options.

If your adjusted gross income is less than $66,000 you can likely file your federal and potentially state taxes for free.

If you make more than $66,00 AGI, the IRS provides fillable forms that are pretty easy to use for your federal but might not be applicable in all circumstances.

https://www.irs.gov/filing/free-file-do-your-federal-taxes-f...


Many states also offer an online filing option.

For example, California has CalFile[1] which covers most situations. There are also some options for free federal filing if your AGI exceeds $66,000 as the requirements set by Free File Alliance[2] members vary depending on the offerings (e.g. FreeTaxUSA[3] doesn't have AGI limits).

[1] https://www.ftb.ca.gov/online/CalFile/index.asp

[2] https://en.wikipedia.org/wiki/Free_File_Alliance

[3] https://www.freetaxusa.com/


I've been using DIY tax, http://www.freetax.com


I used their system to submit my taxes this year. (Edit: the "free fillable forms" system)

Their UX is absolutely atrocious. It will do the math for you, but there are a number of intermediate fields that require you to enter a value manually, but have no indication in the form of what they are. You have to go through their instructions (separate from the IRS instructions) for the form to figure out what fields require manual entry.

Eventually I was able to work my way through the form with research and experimentation.

The only thing I wasn't able to figure out was how to get it to include the penalty for failing to pay estimated taxes. I added the form to my filing and filled it out, but I could never get the number of populate into the 1040 and their form wouldn't let me enter that value manually. While I would have preferred to pay it all at once, my only option was to wait for the IRS to calculate this and bill me for it.

Can we please, please, please get 18F to rebuild this so it doesn't completely suck? Offering a solid, free alternative to Turbo Tax and other abusive companies would be so beneficial.


I was just about to comment about this! I moved outside of the states, and have a non-US bank account, which is something that TurboTax doesn't handle in their free version. I ended up using H&R Block through this Free File, and it covered both federal (1040) and CA returns for free, which TurboTax wanted to charge $30 for CA return and like $40 or $50 for the federal since I have a non-US bank account. If you make less than $66k, definitely check out that link because it can save you a good chunk of money depending in your tax situation.


They likely wanted to charge you more because you would need to file a FBAR if your account was above $10,000 (been a while need to check that threshold hasn’t moved). Big penalty if you do it wrong so you may want to double check.


How are you meant to reckon your AGI without in essence “doing your taxes”?


I'd guess by taking your salary and determining if it was around $66k or less.


AGI is net of deductions though, hence the "adjusted". AGI is literally the bottom line on form 1040. You can't just figure it in your head.


The US median income is well under $66k, making this is a moot point for more than half of filers. If you're on the cusp and trying to guess take the standard deduction.


America, one of the few developed nations where doing your taxes involves paying a third party to help you tell the government what it already knows.

TurboTax and HR block lobby considerably to prevent the government from making the process of paying taxes free, fast, and painless for the overwhelming majority of taxpayers.

https://www.propublica.org/article/filing-taxes-could-be-fre...


Interesting (and not entirely surprising). Reposted that article for more visibility: https://news.ycombinator.com/item?id=16841449


There are lot of things that government does not know e.g., how much I donated to Goodwill or other charities, or if I have multiple homes with mortgages , then which one is my primary residence.

We can argue that the tax code should be simpler but that's a different argument.


The overwhelming majority of folks don't donate enough to charity to hit the tax write-off level.

Countries with sane tax collection systems make it easy for you to add those deductions, either on paper or with a web service run by the government, for free.

And your mortgages, unless they are from international banks, yes, the IRS already knows about those too. Let me put it this way: if it goes through a US domiciled bank, the IRS knows about it already.

Yes, people with complex tax returns do use accountants to file their taxes in countries with sane systems too, but the overwhelming majority don't need the complexity for the equivalent of a w2 and/or a couple of 1099s.


Link is dead.


If one has a simple tax situation, I'd recommend looking at Credit Karma (US) or SimpleTax (Canada).

Unfortunately, I've found TurboTax is better with weird corner cases. It helped me figure out I was eligible for the American Opportunity Tax Credit (US citizen going to university in Canada) which alone was a few thousand dollars that I would have missed if I had filed a 1040-EZ on paper. It has handled 401k->roth rollovers and cost basis, reporting capital gains (when I divested from Bitcoin), paying taxes on Canadian RRSP capital gains, and sales of Restricted Stock Units. I'll probably pay to use it for the foreseeable future.

In Canada, the tax system is less arcane, so the tax software companies have to give it to university students for free to get them hooked. It's too bad that even if I move to another country, I'll have to file US tax returns for life.


I would always advise filing the full 1040 even if the EZ would work for you. If your tax situation is simple you leave most of the lines blank, but it will prompt you to check out a lot of stuff that you would never see if you filed an EZ, including the American Opportunity tax credit.


It's not that hard to do your taxes on your own, especially if you have last year's as a model to check yourself. For computationally-oriented folks, I imagine you probably want to have a mental model of how you're presenting yourself tax-wise (instead of just blindly trusting Turbo Tax). In that case, most of what you're getting with Turbo Tax is UI.


There’s a lot of deductions I qualify for that I didn’t know about until I hired a real accountant. I also didn’t know about depreciation recapture on the sale of a rental property. I didn’t know about depreciation at all. If I hadn’t hired an accountant I never would have known to take the depreciation, and wouldn’t have learned that your depreciation gets recaptured even if you don’t claim it.

If your tax situation is even remotely complicated it pays to not do it yourself. You don’t know what you don’t know.


Many folks here are web/software people. Many of us would actively argue against a business owner building their own website precisely because "you don't know what you don't know", and your time has a certain value. Focus on your business, leave the tech/web/software/marketing to professionals, etc.

At some point it makes sense to DIY; at another point, switching to a professional makes more sense. Figuring out where that line is can be years of "penny-wise, pound-foolish" behaviour of DIY with respect to tax prep.


For the record, Turbo Tax handles this fine. I have used TT for over a decade now and they have been able to handle every situation with no issues. Doing my taxes usually takes me about an hour. Cheaper and faster than having a CPA do it.


I'm almost afraid to ask:

What's the FLOSS analog to Turbotax?

Just to be clear-- I'm talking about a wizard that asks laypeople a clear set of curated questions and ends up with a set of tax forms that are very likely filled in with the correct answers.


http://opentaxsolver.sourceforge.net

It seems to be relatively well updated but I wouldn't be surprised if it made errors.


Opentaxsolver starts with the following imperative sentence: "Select tax program." That means I must know a priori which tax form corresponds to my particular tax situation.

Choosing the correct tax forms is the job of the software, not the layperson. If it cannot or will not perform that job then it isn't a wizard (or at least not on the same level of time-saving as Turbotax).

If it's not a wizard then it isn't the FLOSS analog of Turbotax.

Edit: clarification


When it comes to doing my taxes, $10 or $20 isn’t enough of a deterrent for me to instead opt for a “set of tax forms that are very likely filled in with the correct answers.”


I tried https://www.freetaxusa.com this year since I dislike Intuit so much for their lobbying. The site works very well and has a pretty similar flow to TurboTax except no auto import of financial account info.

I'm not sure the trustworthiness of the company/site. I didn't see any red flags in the privacy policy but would love to hear from others if they've used this.


I've just filed my taxes yesterday with them since TaxAct decided to jack up the price to $80 for federal + state (used to be $30 back in 2011)

Seemed very straightforward, perhaps not as good on the suggestion front as far as potentially reducing your tax burden though.

They also managed to import my prior tax PDF from TaxAct flawlessly, so that's a plus.


I do hate that they lobby for keeping taxes hard to file, but I have no issue paying them $60 to do my taxes. The website is such a great user experience, and they earned that money in my estimation. Why should it be free? They clearly put a lot of work into their site.

My only other issue with them is that they keep emailing me telling me to get started with my filing, but I already completed my tax return weeks ago.


TurboTax UX is solid! I spent a couple of years recommending the product to everyone I knew because I was so delighted by the experience. The $60 was a no-brainer.

But instead of doubling-down on this delightful product experience, they're investing in disingenuous conversion hacks like the "PLUS Help & Tools" upgrade funnel. Designed to feel like it is part of the actual filing process, users are converted more effectively when they're led to believe this is just another step toward completing their task, similar to how users respond to native ads.

In the UX teardown, I take a more critical look at the design decisions behind the freemium funnel. I wish they were more transparent about their pricing structure up front so users could compare the benefits of products and add-ons against their needs and budget.

--

That's frustrating about the emails you're receiving even after filing. Let's hope they build out smarter email campaigns next year that are more aware of user actions across all TurboTax systems.


It’s not that TurboTax should be free. Obviously no one is arguing that.

The argument is that the tax code shouldn’t be so complicated that you need to pay a fee to file your taxes smoothly and with little risk of getting it wrong (and getting audited/fined).


And yes, that's the deeper argument :)


I was with this article until the last paragraph, "Millennials rightly demand more from their products and services than any generation before, and are increasingly skeptical toward disingenuous brands like Walmart and McDonalds. They abhor deceit and trickery, and increasingly gravitate toward brands that align with their values."

Really? Only millenials (whatever that means) are characterized by these values? How do you figure? My experience has been exactly the opposite, actually. But Brandon Read appears to believe that purely because of my "generation", I gravitate toward deceit and trickery. Okay, thanks for that valuable insight, Brandon. Whatever.


I don't think calling out the standard values of one generation necessarily means he's taking shots at other generations. I just think that millennials have been hit with more advertising over the course of their lives than the generations before them, and are therefore more distrustful in general. I think that's all he's trying to say here.


In Canada, I've switched over to https://simpletax.ca. It's free, (supported by donations), and works well even for more complicated filings.


QuickBooks Self Employed is actually a really nice product that I use for my consulting and SaaS companies. I linked my business checking accounts and credit cards with it and can easily tag all transactions (income and schedule C). It also handles estimating quarterly taxes and allow me to make quarterly payments online via eftps.gov. Finally at the end of the year it exports everything right into TurboTax.


eh. mediocre only because he sets the stage early as TT being able to do this devilish stuff because they’ve studied user behavior for a decade or decades and know you. making TT out to be some devil that knows you personally.

honestly it’s standard predatory sales technique that many many companies use, including amazon. (like pretending that prime day prices are actually a bargain)


I am baffled why anyone would ever use TurboTax. It's full of these dark UI patterns and tricks and comparable products exist for a very small fraction of the price. Out of curiosity I looked up what TurboTax would have costed me and they wanted $100 (I have business income) whereas I used TaxHawk for $14.


I'm selfishly happy that tax year 2017 is the last year I'll probably be filing a personal US tax return (at least a substantial one) for a long time. Maybe in 2036 they will have solved this.


Did you renounce US citizenship? I think that's the only way to remove the requirement to file a US tax return.


No. There are lots of other ways. (Renouncing is bad for many reasons; I'm patriotic, although the US has a lot of problems, and there's essentially a 10y tax on unrealized gains at exit, plus lifetime visa problems.)

1) Make <threshold income. (Admittedly, that sucks.) I think it is around $3k/yr.

2) Move to a place which under Section 933 of the IRC can make its own tax laws for bona fide residents. I'm doing Act 22 (and Act 20 for business, and some other things) and taking advantage of the opportunities in the Isle of Enchantment, the Commonwealth of Puerto Rico. There are some similar opportunities for US citizens in the other US territories, but PR is the best one I think, and is certainly the biggest and most developed.

Essentially, until 2035, you pay 0% short term, long term capital gains or dividends. Under Act 20, businesses pay 0-5% on exported services revenue (i.e. anything sold outside PR: SaaS, consulting, etc.). It's pretty nice. Infrastructure is an issue (although gigabit internet is $60/mo), and some costs are higher, but overall it's a good deal. It's hugely popular with cryptocurrency people after crypto to crypto trades started getting taxed fully as st cg.

(Actually I have to file 2018 too, although it will be for <$100, since I think I have some US bank accounts which earn interest.)


That's interesting. But you still have to file a US tax return, right?


Only year-of-move (and year-of-return, but I an uncertain if the US will exist in 2036.) If you have no US liability, because all of your income is PR-source, no need to file US returns in the intervening years. It's possible I'll have some US source income, though, but obviously the goal is to minimize that in favor of PR source income. There are a bunch of complex sourcing rules.

This is different than the Foreign Earned Income Exclusion (FEIE), where you get a $100500 (indexed) deduction, but have to file to claim it.


That's interesting. I left the US many years ago but still have to file an income tax return as well as FBAR. But I don't live in PR.


Yeah, I spent all but 2 years 1998-2011 doing same. FATCA just keeps making it worse.


>>There are some similar opportunities for US citizens in the other US territories, but PR is the best one I think, and is certainly the biggest and most developed.

Maybe it was, but Hurricane Maria fucked it hard and it is unlikely to recover anytime soon. Just the other day a tree fell on a repaired power line and 640,000 people in San Juan (the capital!) lost power. That’s just crazy to me.


Maria was honestly insignificant compared to the 2006-2017 economic problems. Maybe 10%? (It was a big short term problem, especially due to the deferred maintenance and lack of resources/capabilities, but wouldn't have been a lingering crisis without the economic problems.)

Savings from 0% tax pays for a pretty amazing generator/solar/lithium ion battery system. The electrical grid is being privatized and turned into a bunch of microgrids (already happening; upscale condo buildings have generators, and the homes of rich people have generators/solar.) The biggest problem is traffic lights, which don't work even in the areas with power, but outside of SJ and first-ring suburbs traffic volumes are fairly light.


I bought the turbo tax CD which claimed to come with phone support from CPAs. The CD worked fine for the most part but the phone support was basically a scam.


I used their online video support this year. I thought it was pretty good. You get an appointment, the. They all you (on time!) and open a little video window in your browser. Overall I felt more confident in my return knowing a CPA looked at it, mostly because I could describe my individual situation and confirm I was reporting it correctly.


I don't believe you need to read any of their clever commentary to use the service. You can ascertain the purpose of each screen by looking at the available options and click through ignoring all suggestions to pay them more.




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