Intuit changed TurboTax this year, triggering an enormous customer uproar

Will Intuit's big blunder mean a loss of market share for its TurboTax?

Intuit's TurboTax software program long has been the king of do-it-yourself tax preparation, with nearly 30-million customers and a market share of 60-65%. 

But you probably won't lose money betting that these figures will come down next year. That's because Intuit quietly made changes in TurboTax this year that has its customers screaming bloody murder and its rivals--H&R Block and TaxAct--rubbing their palms together in glee. H&R Block is even offering irate TurboTax customers a free download of its own software program.

It doesn't help that Intuit thus far hasn't fallen over itself to make things right with its customers. And while it's dithered, its stock has withered: Intuit shares have lost 7.25% this year through Friday, much worse than the 3% decline suffered by the S&P 500 index.

Here's what happened.

Users of the TurboTax deluxe edition, which sells for a list price of $59.99 but can be found almost everywhere for $49.99, have discovered that for the first time, the program won't allow them to file tax schedules C, D, E or F automatically with their tax returns.

Schedule D is used by anyone reporting 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). They're not uncommon. Disclosure: I've been a long-term user of TurboTax and I do file some of these schedules, but I haven't done my taxes yet this year.

Hints of this change are present on the Deluxe program's packaging, but in a very obscure way. Many users discover the problem only when they get to the point in doing their taxes where they have to start plugging information into those schedules. TurboTax then informs them they have to upgrade to the "Premier" edition, which costs another $25-$30, or even to the "Home & Business" version, which is priced $10 above Premier.

Some commentators have observed that there's a work-around, but it's unsatisfactory--Deluxe users can fill out their schedules manually, but then the documents can't be filed electronically with the rest of the federal return.

Any way you cut it, Intuit this year is selling a product at the same price as last year, but with significantly less to offer. Another way of putting it is that the firm has raised the price of TurboTax for many users by $30 or more.

Customers have responded as you'd expect. As I write, on the Amazon.com customer review page for the Windows download version of TurboTax Deluxe, 1,360 out of 1,526 customers have given the program the lowest rating of one star.

Wrote one reviewer: "I hate being gouged, and I hate weasel word explanations even more." This appears to allude to Intuit's hamfisted response to the uproar, which appears to be written in pure corporate gibberish.

Intuit spokeswoman Julie Miller told me in an email: "As new online and mobile technologies emerged, our products, and the tax scope and features they included, began to differ, leading to customer confusion. These differences also impeded our ability to introduce new innovations across the entire TurboTax product line. So this year, we made the product experience consistent across all TurboTax offerings. This change enables us to innovate faster and make improvements that benefit all customers at the same time, regardless of whether they use our online or desktop software."

When I asked Miller why resolving "customer confusion" required removing functions from Deluxe in a way that caused confusion, she replied that the goal was to ensure that the desktop version of Deluxe was the same as the online or mobile version. Of course, Intuit could have added the schedules to the online and mobile versions, instead of removing them from the desktop version--then it would have won plaudits and customer loyalty by adding value. Evidently, however, its vision was obscured by the dollar signs dancing in its head, 30 bucks at a time.

What makes this decision so curious is that home tax software is the quintessential "sticky" product. Nobody buys more than one program per year so they might compare, say, TurboTax to H&R Block--who wants to do their taxes twice? Most people will stick with the same program year after year as long as they're reasonably satisfied with it and don't have a reason to change; since learning the ins and outs of a whole new program is the very definition of a pain in the rear. 

Intuit, however, now has given many of these customers a reason to change. The task of getting them back once they've become used to, say, H&R Block will be Herculean. 

TurboTax customers have reason to be concerned about Intuit's slow and half-baked response to the complaints. Janet Novack of Forbes reports that dissatisfied customers can call an Intuit helpline, where customer reps are supposedly empowered to offer them free downloads of the costlier programs.

That's a case-by-case solution, and it won't do. Miller says that later this week "we'll be communicating to our TurboTax desktop customers about these changes and what we’re doing to make this right for them." She wouldn't say Monday what this would mean. 

Intuit says it's aware of the complaints, it's "sorry for the anger and frustration we have caused many longtime customers," and pledges to resolve the complaints "to their satisfaction" if they'll just call.

But where's its sense of urgency? The uproar over TurboTax started almost immediately after New Year's Day, and has been spread by personal finance experts and by word of mouth ever since. For Intuit, the day of reckoning for its tax-preparation software franchise may arrive a lot sooner than April 15.

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