TurboTax owner Intuit agrees to $141 million settlement over deceptive practices

by ian

Ian Patrick, FISM News

TurboTax parent company Intuit has settled on an agreement with all 50 states and Washington, D.C. that amounts to $141 million. The settlement is over accusations that TurboTax’s advertising for their “free” tax filing services was deceptive in nature.

On Wednesday, New York Attorney General Letitia James released a statement saying “Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to.”

She further called the agreement “a reminder” for any company looking to employ “deceptive marketing.”

For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal. New Yorkers can count on my office to protect their wallets from white-collar scammers.

The resolution centers around Intuit’s offering of two different tax filing services. One of these was in partnership with the IRS Free File Program that “allows taxpayers earning roughly $34,000 and members of the military to file their taxes for free,” according to James. Enrolling in this program meant the IRS would not offer its own competitive tax preparation service.

But Intuit also featured their commercially marketed “TurboTax Free Edition” product, which was heavily featured in ad campaigns. The most prominent commercials, which were referenced by James, featured the word “free” either exclusively or for the majority of the ad.

The advertising for the “Free Edition” product claimed that Americans with “simple returns” can use this product completely free of charge. However, the product was only free for about one-third of applicants. Others eventually came to a page where they were told that they would need to upgrade their service to complete their filing process.

In comparison, the joint offering with the IRS was free for about 70% of American taxpayers.

James said the Office of the Attorney General opened an investigation into the matter after a 2019 ProPublica article exposed the difficult and convoluted nature or finding the IRS-affiliated product rather than the “Free Edition” product.

Furthermore, James writes that the investigation “found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program.” The settlement has Intuit paying for customers from 2016 to 2018 that were deceived by the products once or multiple times.

Under the agreement, Intuit will provide restitution to nearly 4.4 million consumers who started using TurboTax’s Free Edition for tax years 2016 through 2018 and were told that they had to pay to file even though they were eligible to file for free using the IRS Free File program offered through TurboTax. Consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services. Impacted consumers will automatically receive notices and a check by mail.

Intuit has also agreed to reform its advertising practices which includes better disclosures and information in its products and refraining from any “misrepresentations” in their promotions.

Intuit said it expects “minimal” impact to its business from this agreement and admitted to no wrongdoing in their practices, according to Reuters. The company previously withdrew from the IRS agreement in July of 2021.

The Federal Trade Commission, which had opened its own case against the company concerning its advertising, will continue their investigation.