TurboTax will refund 4.4 million taxpayers after a $141 million settlement that claimed the software company used deceptive practices.
New York Attorney General Letitia James announced the settlement on Wednesday with TurboTax being accused of deceiving customers with its “free, free, free” advertisement campaign and hiding its free IRS filing option.
“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” Attorney General James said in a statement. “For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans.”
Attorney General James began her investigation after a 2019 Pro Publica report that stated TurboTax lured in low-income taxpayers with its promise of free services that were federally funded, only to be met by a confusing interface that led many to “upgrade” without knowing. From there, the only way to downgrade is to start over the filing process.
Another deceptive tactic used by the software company was in the form of its “TurboTax Free Edition,” which was only free for a simple tax return, aggressively advertising the “free” services, although only one-third of tax filers qualified for the service.
TurboTax was also found to be hiding the IRS Free File program from search engines and would not recommend it on its website, even as some taxpayers did not qualify for their “Freemium” deals.
Under the settlement’s terms, Intuit, the company behind TurboTax, can no longer “misrepresent” its services and instead must highlight the disclosures of its free products.
TurboTax must also better inform taxpayers if they qualify for the free services, or not, and cannot make filers start over if they opt out of the upgraded filing process.
In 2021, Intuit withdrew from the IRS Free File program.
“This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal,” James said.
Those who paid for upgraded services after being offered free services will be automatically refunded $30, with notices and checks being sent by mail at a future date.