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Intuit, owner of the popular tax-filing software TurboTax, has agreed to pay a $141 million settlement after authorities alleged it deceived millions of low-income Americans into paying for tax-return services that should have been free.
Intuit will provide restitution to nearly 4.4 million consumers who used TurboTax’s Free Edition between tax years 2016 and 2018, according to a multistate agreement brokered by New York Attorney General Letitia James. These consumers were told they had to pay to file, even though they qualified for the IRS Free File program, a partnership between the agency and major tax prep software companies.
Through the program, individuals earning less than $34,000 can file their taxes free of charge. In return, the IRS has agreed not to develop its own online tax return program.
Intuit withdrew from the Free File program in July 2021 to launch its own product, TurboTax Free Edition, which it said was free for customers with “simple tax returns” that used IRS Form 1040.
But in March, the Federal Trade Commission issued a complaint against Intuit, alleging that two-thirds of eligible filers couldn’t use TurboTax Free Edition in 2020, including gig workers. Investigators said Intuit also engaged in deceptive trade practices, including intentionally blocking its IRS Free File landing page from search engine results during the 2019 tax filing season.
“For years, Intuit misled the most vulnerable among us to make a profit,” James said. “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.”
As part of the settlement, Intuit must suspend TurboTax’s “Free, free, free” ad campaign that “lured” customers with promises of free tax preparation services, “only to deceive them into paying,” according to a release from James’ office.
The commercial, which aired during the Super Bowl, featured an announcer declaring “TurboTax Free is free. Free, free, free, free.”
Intuit has also agreed to better inform users if they qualify to file for free and to refrain from making misrepresentations and to enhance disclosures in its advertising and marketing of free products.
According to the settlement, eligible customers will be mailed a check for approximately $30 for each year they were wrongly charged.
In a statement, Intuit admitted no wrongdoing and said it agreed to the deal to “put this matter behind it.”
Kerry McLean, Intuit’s executive vice president and general counsel, said the company is “clear and fair with its customers,” citing 100 million taxpayers who have filed for free with TurboTax products in the past eight years.