TurboTax settlement to benefit some Delawareans
The parent company of TurboTax has agreed to a $141 million, mulitstate settlement that could refund money to Delawareans who paid for tax preparation that should have been free.
In the settlement announced May 4 by Attorney General Kathy Jennings, more than $400,000 was secured for low-income Delawareans who used TurboTax’s tax preparation service that was widely advertised as “free, free, free.”
”Intuit benefited from a special agreement with the U.S. government to provide free tax services to low-income consumers nationwide, all while preventing Delawarean consumers from taking advantage of those free services,” Jennings said. “Intuit engaged in deceptive and unfair tactics to hide access to free services and to instead promote its own profit-generating tax filing products instead. Delawareans who struggle to put food on the table shouldn’t be tricked into paying for tax preparation services they don’t need.”
Under the agreement, Intuit will provide restitution to millions of consumers who started using TurboTax’s Free Edition for tax years 2016 through 2018 and were told that they had to pay to file even though they were eligible to file for free. Consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services. Impacted consumers will automatically receive notices and a check by mail.
Intuit had offered two free versions of TurboTax. One was part of the IRS Free File Program, which allows taxpayers earning about $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to American taxpayers.
The second product was “TurboTax Free Edition,” which is only free for about one-third of U.S. taxpayers with “simple returns” as defined by Intuit. In recent years, Jennings said, TurboTax has marketed this “freemium” product aggressively, using ad campaigns where “free” is the most prominent or sometimes the only selling point. In some ads, the company repeated the word “free” dozens of times in as little as 30 seconds.
The multistate investigation found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program. The company used confusingly similar names for both its IRS Free File product and its commercial “freemium” product, Jennings said. Intuit bid on paid search advertisements to direct consumers who were looking for the IRS Free File product 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, Jennings said. Moreover, she said, TurboTax’s website included a “Products and Pricing” page that stated it would “recommend the right tax solution,” but never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.
Intuit withdrew from the IRS Free File program in July 2021, and has agreed to refrain from making misrepresentations in connection with promoting or offering any online tax preparation products, and to design its products to better inform users whether they will be eligible to file their taxes for free.
