According to New York’s attorney general, the company behind the TurboTax tax-filing program will pay $141 million to customers across the United States who were duped by false promises of free tax-filing services.
According to New York Attorney General Letitia James, under the terms of a settlement signed by the attorneys general of all 50 states, Mountain View, California-based Intuit Inc. will suspend TurboTax’s “free, free, free” ad campaign and pay restitution to nearly 4.4 million taxpayers.
James said her investigation into Intuit was prompted by a 2019 ProPublica report that found the company using deceptive tactics to steer low-income tax filers away from federally supported free services for which they qualified — and instead toward its own commercial products.
“Intuit deceived the most vulnerable among us for years in order to make a profit.” “Today, every state in the country is holding Intuit accountable for defrauding millions of taxpayers, and we’re putting millions of dollars back into the pockets of those who have been impacted,” James said in a statement. “This agreement should serve as a reminder to both large and small businesses that engaging in deceptive marketing tactics is illegal.”
“As part of the agreement, Intuit admitted no wrongdoing, agreed to pay $141 million to put this matter behind it, and made certain commitments regarding its advertising practices,” Intuit representatives wrote in a blog post on Wednesday. “Intuit already follows the majority of these advertising practices and expects the remaining changes to have little impact on its business.”
Until the end of last year, Intuit provided two free versions of TurboTax. One way it did this was through its participation in the Internal Revenue Service’s Free File Program, which is aimed at taxpayers earning less than $34,000 and members of the military. Intuit withdrew from the program in July 2021, citing the program’s limitations in a blog post.
In addition, the company sells a commercial product called “TurboTax Free Edition,” which is only available to taxpayers who have “simple returns,” as defined by Intuit.
According to documents obtained by ProPublica, Intuit executives were aware that they were misleading customers by advertising free services that were not available to all.
“The website lists Free, Free, Free, and customers assume their return will be free,” according to an internal company PowerPoint presentation. “Customers are becoming agitated.”
According to the agreement, Intuit will compensate customers who began using the commercial TurboTax Free Edition for tax years 2016 through 2018 and were told they had to pay to file despite being eligible for the version of TurboTax offered as part of the IRS Free File program.
Consumers are expected to receive a direct payment of around $30 for each year they were duped into paying for filing services, according to James. Notices and checks will be mailed to them automatically.
“We empower our customers to take control of their financial lives, including tax preparation,” an Intuit spokesperson said in a statement to ProPublica in 2019.
A “government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor, and enforcer) the tax preparer is fraught with conflicts of interest,” according to the spokesperson.