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TurboTax’s database knows your secrets

(Matt Krantz)  TurboTax customers are already outraged with a stealth 50% price hike in the software this year. But more secrets are coming out that might be equally surprising to some.

Intuit (INTU), the company that makes TurboTax, maintains a database containing users’ Social Security numbers, names and other personal data — even for customers using the desktop version of the software who save their files on their own hard drives.

The existence of the database was revealed to users when Intuit set up a website for customers to ask for their $25 refunds from the software price increase. The site at requires users to enter their Social Security numbers to get their $25 refunds. That indicates that personal tax data is, indeed, being stored by Intuit.

Screen grab of Intuit/TurboTax site

The fact that Intuit is keeping personal data — even on customers using the desktop version of the software —  is a bit of a surprise to some. Many taxpayers using the desktop version of the popular tax-preparation software thought they were keeping their personal information stored on their PCs — not on Intuit’s servers.

Consumers are understandably sensitive to where their digital information is stored and by whom. Rampant security breaches by retailers have been a reminder of the value of data security.

Intuit maintains a database on the 80% of its customers who choose to file their tax forms online, says TurboTax spokeswoman Julie Miller. The database is maintained “in accordance to IRS regulations,” which require any companies processing e-filing to provide customer’s data and store that information.

The rule applies to anyone performing e-file services, including human CPAs, Miller says. TurboTax is asking consumers to enter their Social Security number to get their $25 refund from the pricing change because that’s the fastest and easiest way to confirm the consumer bought the product last year, Miller says.

The news is just the latest discovery by TurboTax users, who have taken their push online to protest big changes to the tax software this year. Customers have panned TurboTax and other venues to protest the company’s decision to tweak its midrange “Deluxe” version of the software to strip away the features needed by investors. Investors who sold stock are now required to buy the most expensive “Premier” version of the software.

But there have been other discoveries that have been surprising. Most of the public outcry has been with users of the Deluxe version of TurboTax, who were forced to buy the Premier edition to keep the same functionality as last year. But Intuit also stripped out the capital gains forms in the Basic edition of the software — requiring customers to buy the Deluxe version. These consumers aren’t eligible for the $25 refund, according to the site set up by Intuit. “Last year, Basic included the forms. This year it doesn’t,” Miller says. Basic users who needed to trade up to the Deluxe version should call Intuit, and inquire about what can be done to compensate them, Miller says.

And in another disappointment to users, TurboTax still hasn’t stated what capabilities, if any, will be restored to the Basic and Deluxe editions of the software next year. That’s causing confusion over whether these changes were permanent or not.

Meanwhile, TurboTax rival H&R Block (HRB) is aggressively going after TurboTax users — even offering the software for free. And without clarity of what TurboTax’s features will be next year, consumers’ loyalty is being tested.

“We understood we threw (TurboTax customers) a curveball,” says Miller referring to the changes in the functionality of this year’s products. “We will have work to do to see what next year looks like.”