The New York attorney general announced Wednesday that the company behind the TurboTax tax filing program will pay $141 million to customers across the United States who have been deceived by misleading promises of free tax filing services.
Under the terms of the settlement signed by prosecutors in all 50 states, Intuit Inc. Based in Mountain View, California, it is suspending TurboTax’s “free, free, free” advertising campaign and refunding payments to nearly 4.4 million taxpayers, New York Attorney General Letitia James said.
James said her investigation into Intuit was due to a 2019 ProPublica report that found the company was using deceptive tactics To steer low-income tax funders away from the free, federally subsidized services for which they are eligible — and toward their own commercial products, instead.
“For years, Intuit has misled the most vulnerable among us for profit. Today, every state in the country holds Intuit responsible for deceiving millions of taxpayers, and we are putting millions of dollars back into the pockets of affected Americans,” James said in a statement. “This agreement should serve as a reminder It is illegal for companies large and small to engage in these deceptive marketing ploys.
“As part of the agreement, Intuit has admitted no wrongdoing, has agreed to pay $141 million to put this matter behind it, and has made certain obligations in connection with its advertising practices,” Intuit representatives said in a blog post on Wednesday. “Intuit is already committed to most of these advertising practices and expects minimal impact on its business from implementing the remaining changes going forward.”
Until last year, Intuit offered two free versions of TurboTax. One was through his participation in the Internal Revenue Service’s Free File Program, geared toward taxpayers earning nearly $34,000 and members of the military. Intuit pulled out of the program in July 2021, saying in a blog post that the company could provide more benefits without the program’s limitations.
The company also offers a commercial product called “TurboTax Free Edition” that is intended only for taxpayers with “simple returns,” as defined by Intuit.
According to documents obtained by ProPublica, Intuit executives knew they were deceiving customers by advertising free services that were not, in fact, free for everyone.
“The website lists free, free, and free listings, and customers assume their return will be free,” said an internal PowerPoint presentation. “Customers get upset.”
Under the agreement, Intuit will provide compensation to consumers who began using the free version of TurboTax for the 2016 tax years through 2018 and were told they had to pay to apply even though they were eligible for the TurboTax version offered as part of the IRS free file program.
James said consumers are expected to receive a direct payment of approximately $30 for each year they are tricked into paying for registration services. They will automatically receive notifications and checks by mail.
“We empower our customers to be in control of their financial lives, including taking responsibility for their own tax preparation,” an Intuit spokesperson told ProPublica in a 2019 statement.
“The government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor, and enforcer) a tax preparer is fraught with conflicts of interest,” the spokesperson added.