Turbotax: Intuit pays $141 million settlement for false advertising of TurboTax Free Edition

Under the terms of a settlement signed by attorneys general of all 50 states, Mountain View, Calif.-based Intuit Inc. will suspend TurboTax’s “free, free, free” advertising campaign and notify nearly 4.4 million taxpayers, the Attorney General of New York to pay compensation Letitia James said.

James said her investigation of Intuit was sparked by a 2019 ProPublica report that found the company was using fraudulent tactics to deprive low-income taxpayers of the government-backed free services they qualified for, away – and instead to his own commercial products.

“For years, Intuit has deceived the most vulnerable among us to make a profit. Today, every state in the nation blames Intuit for defrauding millions of taxpayers, and we’re putting millions of dollars back into the pockets of affected Americans.” James said in a statement. “This agreement should serve as a reminder to businesses large and small that engaging in these deceptive marketing ploys is illegal.”

A message was left on Intuit asking for a comment.

Intuit has offered two free versions of TurboTax. One of these was participation in the Internal Revenue Service’s Free File Program, which caters to taxpayers earning about $34,000 and members of the military. Intuit withdrew from the program in July 2021. The company also offers a commercial product called “TurboTax Free Edition” intended only for taxpayers with “simple tax returns” as defined by Intuit.

According to documents obtained by ProPublica, Intuit executives knew they were deceiving customers by promoting free services that aren’t actually free for everyone.

“The site lists Free, Free, Free and customers assume their return is free,” says a company PowerPoint presentation. “Customers are upset.”

Under the terms of the agreement, Intuit will provide a refund to consumers who began using the commercial TurboTax Free Edition for tax years 2016-2018 and who have been notified that they had to pay for filing, although they are entitled to the The version of TurboTax offered by the IRS had a free file program.

Consumers are expected to receive a direct payment of about $30 for each year they have been tricked into paying for archiving services, James said. You will automatically receive notices and checks in the mail.

“We empower our clients to take control of their financial lives, which includes taking responsibility for their own tax preparation,” an Intuit spokesman said in a 2019 statement to ProPublica.

The spokesman added that a “government-run pre-filled tax preparation system that makes the tax collector (who is also investigator, examiner and enforcer) the tax preparer is fraught with conflicts of interest.”