Intuit nixes TurboTax prep and printing fees for additional returns

Intuit has removed fees for preparing and printing additional returns in TurboTax following a groundswell of complaints.

On Wednesday I detailed how user complaints were surfacing over Intuit's new fees. Intuit had planned to charge a fee of $9.95 per additional return, which covers preparation, e-filing and printing.

Intuit had some decent reasons for the fee--aligning online and desktop software pricing for instance--but the backlash was big. In a statement issued Thursday, Intuit's Dan Mauer, general manager of Intuit's consumer division, said:

“We’re responding to changing market conditions and customer feedback."

If you paid the $9.95 fee you will get a refund from Intuit. In addition consumers that bought the desktop software with the old structure can update TurboTax over the Web. Intuit will follow the lead of H&R Block's TaxCut software, which allows up to five additional returns to be prepared without a fee.

While the issue was unfortunate for Intuit customers I give the software maker props for at least listening. I noticed how much of an issue this TurboTax fee was shortly after my post went live. I got email from H&R Block and other tax software providers all talking about fees and trying to kick a rival.

The reason for the hubbub is pretty clear: There's some serious money at stake. Speaking of dinero, Intuit said its decision to remove the additional fees will shift some revenue around. Intuit said it will defer $70 million of revenue from the second quarter to the third quarter. Second quarter revenue is now expected to be $790 million to $810 million, down 3 to 5 percent from a year ago. Earnings excluding charges are expected to be between 26 cents a share to 28 cents a share and 16 cents a share to 18 cents a share fully loaded.

Intuit said its fiscal 2009 outlook is unchanged.

What is clear from the Intuit fee fiasco is that the software maker doesn't have the pricing power in this economy.

Jeffries analyst Ross MacMillan said in a research note:

This change was driven by consumer pushback as well as competitive pressure from its closest competitor H&R Block that was on a marketing offensive highlighting 5 free returns with its equivalent desktop software.

Wachovia analyst Philip Rueppel noted that Intuit had to meet H&R Block's pricing on preparation and printing fees to keep market share in a weak economy. Rueppel wrote in a research note:

We continue to believe that the economy will have a dampening effect on both its small business and financial institutions segments and limit upside in the tax business due to competitive pressures.