Intuit finally backs down--all the way down--in its TurboTax fiasco

Intuit finally fixes its TurboTax fiasco--but why did it take so long?

Intuit, the maker of the popular TurboTax software program, has finally gotten the message that when you've outraged a large portion of your customer base, responding with half-measures doesn't work.

The company announced Wednesday that it will roll back the changes it made in TurboTax this year that effectively made the program more expensive for many filers, and will cancel the changes for next year. This year's users who have been forced to upgrade their TurboTax version to complete their taxes can now upgrade from within their program for free, rather than waiting until they file their returns and applying for a rebate. Intuit is communicating its decision by email to registered TurboTax buyers.

"These past couple of weeks have not been our finest hour," Intuit CEO Brad Smith says in a video posted on the company's website.  

The only remaining question is what took them so long? 

As we've reported, users of this year's TurboTax Deluxe edition, which sells for a list price of $59.99 but can be found almost everywhere for $49.99 or less, discovered that the program wouldn't allow them to file tax schedules C, D, E or F automatically with their tax returns.

These are the most common forms for taxpayers with outside income. Schedule D is to report capital gains or losses from stock or bond sales. The others cover profit or loss and business expenses from a sole proprietor business, such as a home business (C); income from rental property, royalties or partnerships (E); and farm income (F). 

When users got to the point in their tax filing that they had to fill in those forms, TurboTax informed them they'd have to upgrade to the more expensive Premier or Home & Business versions. This amounted to an unexpected price hike of $30 or more for the same functions as last year.

An uproar ensued. Intuit's rivals in the home tax software space, H&R Block and TaxAct, tried to take advantage by advising TurboTax users that their packages still provided all the old functionality at the lower price. Block even offered free downloads of its program to outraged TurboTax customers. TurboTax's days as the undisputed king of home tax software, with more than 60% of the market, seemed numbered.

After a few weeks of continued grousing by its once-loyal customer base, Intuit backed partially down. It offered a $25 rebate to those forced to upgrade to the higher-priced versions. But they had to finish and e-file their taxes first, then apply for the rebate--and it was good only if they filed by April 15. Users who got the automatic six-month extension to file their taxes were out of luck. And Intuit wouldn't say if it would just institute the higher prices next year. 

We pointed out in a follow-up that this was a strange, inordinately complicated process, since the company has the technology to simply upgrade all its users' Deluxe programs on the fly--the way it sends upgraded tax forms to users for automatic downloading via the Internet. Not a convincing demonstration of customer service.

Intuit has finally taken the right measures. Deluxe users will be able to upgrade to Premier or Home & Business functionality from within the Deluxe program, for free. Those who already upgraded can still apply for the $25 rebate. Smith says that executing the necessary program changes will take until early February, when the automatic upgrades should start working. And the non-wage schedules will be restored to Deluxe next year. 

That, finally, is a convincing demonstration that Intuit is listening to customer complaints. But it could have done the right thing from the outset--or, even better, never done the wrong thing at all.

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