Those TurboTax commercials that offered “Free, free, free, free” tax prep services are about to be gone, gone, gone, gone.
Intuit, the company that makes TurboTax software, has agreed to halt the ubiquitous ad campaign and pay $141 million to consumers after attorneys general in multiple states accused it of unfairly charging for what should have been free tax preparation services. Intuit said it admits no wrongdoing and agreed to the settlement to put the matter behind it.
“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” Letitia James, New York’s attorney general, said in a statement Wednesday announcing the settlement of an investigation she conducted with her counterpart in Tennessee and seven other states. “For years, Intuit misled the most vulnerable among us to make a profit.”
Nearly 4.4 million consumers in all 50 states and Washington, D.C., will benefit from the settlement, getting restitution of about $30 a year for each of the 2016, 2017 and 2018 tax years if they paid to use a TurboTax product marketed as free despite being eligible for the free version of TurboTax that was available through the IRS Free File program. (TurboTax stopped participating in the Free File program in July 2021.) Those who are eligible for the payments will automatically receive notices and a check by mail, the attorneys general said.
The settlement highlights public confusion and lack of awareness surrounding the free options for filing federal tax returns. About 70% of taxpayers qualify for free services under the IRS Free File program (generally for those with an adjusted gross income of $73,000 or less) but less than 3% actually use it, according to a recent report from the Government Accountability Office.
Turbotax advertised free tax preparation services despite the fact that only about a third of taxpayers were actually eligible to use TurboTax Free Edition for free, the attorneys general alleged. TurboTax also allegedly encouraged consumers to think its own paid product was part of the Free File program, they said.
Intuit said the settlement makes a lawsuit by the Federal Trade Commission, which raises similar allegations, unnecessary, though it’s fully prepared to litigate. The company also said it already adheres to most of the advertising practices committed to in the settlement and “expects minimal impact to its business from implementing the remaining changes going forward.”
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