Intuit, the company behind TurboTax, agreed to pay $141 million after it “scammed millions of low-income Americans out of free tax filing services,” New York Attorney General Letitia James put it. Most of that money will go to consumers who have been tricked into paying for their services. This comes as a result of Agreement entered into with AG (and officials from all 50 states and the capital), which would also require the company to change its marketing practices.
to me Attorney General’s press releaseIntuit will owe people $30 for each year they were tricked into paying for a TurboTax between 2016 and 2018. “Affected consumers will automatically receive notifications of impending mail,” the document notes.
TurboTax has always been abused for being opaque and having deceptive marketing. For years, there were two versions of its tax preparation software that had “Free” in the name: TurboTax Free Edition and TurboTax Free File. According to AG, Intuit largely marketed the free version as being pretty good free (the press release notes that some ads used the word “dozens of times in the shortest 30 seconds”). But about 4.4 million people ended up with Intuit money when they used it.
What they had to use was the hard-to-find version of Free File, which was part of the Free File program of the Internal Revenue Service. The program came from a partnership between the government and tax firms intuit included. You were supposed to make sure that the majority of Americans got a free copy of tax preparation software like TurboTax. It also, as the press release notes, prevented the IRS from creating its own competition service.
Intuit will stop participating in Free File in 2021 Citing “restrictions” and “conflicting demands from outside the program”. This was after the IRS Program rules changedprevent tax companies from hiding their already free products from search engines (something Reportedly, Intuit and H&R Block). The rule change also allowed the IRS to create its own free file system, but it hasn’t done so yet.
Intuit’s participation in the program for her It has been scrutinized by lawmakers such as Senator Elizabeth Warren (D-MA). Last month, Warren sent a letter to the company, accusing it of “pressing to protect its shady business practices.” The letter also stated that TurboTax products “deceive US taxpayers into paying for services that should be free.”
Consumers will not receive the full $141 million — AG’s press release notes that “about $2.5 million will be used to cover administrative fund costs.” Aside from agreeing to fork out the funds, Intuit also said it will:
- Stop misrepresenting online tax preparation products
- Improving disclosures in its advertisements and marketing of its free products
- Make it clearer in TurboTax itself whether you qualify for free files
- Don’t make customers start over if they switch from a paid product to a free one
The points about advertising are particularly interesting, because the Federal Trade Commission I filed a lawsuit against the company recently for his use of the word “free” in an attempt to “put an immediate end to false advertising for Intuit.” The FTC’s complaint, filed in March, says there is a hearing scheduled for the matter in September.