TurboTax will return $141 million to customers after the company was accused of pitching “free” tax filing to millions of Americans.
The Federal Trade Commission and a number of state attorneys general filed a suit against Intuit, the parent company of TurboTax, alleging the company deceived low-income tax filers into paying for tax services that should have been free.
According to a court filing, the IRS and Intuit formed a public-private partnership in 2002. In the agreement, Intuit would offer a version of its TurboTax software for free for low-income users. In exchange, the IRS agreed not to compete with TurboTax by creating its own electronic tax preparation.
From 2017 through 2021, Intuit made the free-file software available for those who receive the earned income tax credit.
But what the FTC and state attorneys general alleged was Intuit knew customers were confused about the products offered by TurboTax.
“The company used confusingly similar names for both its IRS Free File product and its commercial ‘freemium’ product,” the New York Attorney General’s office said. “Intuit bid on paid search advertisements to direct consumers who were looking for the IRS Free File service to the TurboTax ‘freemium’ product instead. Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free.”
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The FTC called this practice a “bait-and-switch.”
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
Intuit decided to opt out of the IRS’ free file program in July 2021.
Impacted TurboTax customers who used the program for tax years 2016, 2017 or 2018 will be eligible for the checks. Most customers will get a check between $29 and $30. Eligible customers will get an email about the payment.
The IRS continues to partner with several companies that offer free filing programs. A list is available on the IRS website.
