$141 million TurboTax settlement announced over “free” ads

UNITED STATES – Intuit, the company behind the TurboTax tax filing program will pay $141 million to customers across the country who were deceived by misleading promises of free tax-filing services, announced by New York’s Attorney General on Wednesday.

We’re told that under the terms of a settlement signed by the attorneys general of all 50 states and the District of Columbia, Intuit Inc. will suspend TurboTax’s “free, free, free” ad campaign and pay restitution to nearly 44 million taxpayers.

New York Attorney General James said the investigation was sparked by a 2019 ProPublica report that found the company was using deceptive tactics to steer low-income tax filers away from the federally supported free services for which they qualified and toward its own commercial products instead.

Intuit has offered two free versions of TurboTax. One was through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service, which allows taxpayers earning roughly $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to American taxpayers.

Additionally, Intuit offers a commercial product called “TurboTax Free Edition” which is only free for taxpayers with “simple returns”. According to documents obtained by ProPublica, Intuit executives reportedly knew they were deceiving customers by advertising free services that were not in fact free to everyone. In recent years, TurboTax has marketed this product in an aggressive manner, including through ad campaigns where “free” is the most prominent or, in some cases, the only selling point. However, the TurboTax “freemium” product is only free for roughly one-third of U.S. taxpayers, while the IRS Free File product was free for 70 percent of taxpayers.

Under this agreement, Intuit will provide restitution to consumers who started using the commercial TurboTax Free Edition for tax years 2016 through 2018 and were told they had to pay to file even though they were eligible for the version of the software offered as part of the IRS Free File program. Intuit has also agreed to reform its business practices, including refraining from making misrepresentations in connection with promoting or offering online tax preparation products.

James says consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services.

Intuit withdrew from the IRS Free File program in July 2021.

Maryland Attorney General Brian Frosh says more than 66,000 Maryland consumers are eligible for restitution, securing more than $2 million for the state. Delaware Attorney General Kathy Jennings secured over $400,000 for affected Delaware consumers.