For years, the creator of the TurboTax software claimed that people could file their tax returns online for free. Millions of customers signed up to pay hidden fees later in the process.
That was the finding of a multi-state investigation led by New York Attorney General Letitia James. Ms. James announced Wednesday that Intuit, the company that created the software, would pay back $141 million to more than four million Americans who had been falsely sued for tax authorities falsely advertised as free. Refunds are automatically sent to the affected taxpayers.
The company “has cheated millions of low-income Americans out of free tax filing services they were entitled to,” said Ms. James, adding that the settlement, signed by the attorneys general of all 50 states and the District of Columbia, is a clear reminder. to companies that “misleading marketing ploys” are illegal.
The settlement also requires Intuit, which enticed customers with its “free, free, free” ad campaign, to stop misrepresenting its tax products. Intuit said in a statement that the company has admitted no mistakes and agreed to pay the settlement fee “to get this case over with.”
Ms. James’ office led a multi-state investigation into Intuit’s misleading advertising after ProPublica reported that the company was cheating customers who qualified for free tax services and instead redirected them to sign up for paid versions.
One in three taxpayers in the United States qualified for the company’s commercial product, “TurboTax Free Edition,” according to Ms. James’s office, compared with 70 percent of taxpayers for a free federal program administered by the Internal Revenue Service. Revenue Service. The TurboTax product was only free for some: taxpayers who had “easy returns.”
Through its partnership with the federal program, the Free File Program, Intuit allowed select low-income individuals and members of the military to file their taxes for free through TurboTax.
But the company deliberately used “various deceptive and unfair business practices” to keep customers from participating in the federal program, Ms. James said. Methods included buying search engine ads to divert people from the federal program to TurboTax’s “free” commercial product, and in 2019 even to prevent the landing page for its free service from appearing in search engine results.
Intuit announced in July 2021 that it would exit the federal tax filing partnership program with the IRS, instead focusing on “accelerating” other innovation.
The settlement affects 4.4 million customers eligible for the IRS Free File program who were maneuvered to use the free version of TurboTax during tax years 2016 through 2018. pay for TurboTax.
Preliminary estimates from the settlement document show that Texas had the highest number of consumers who were misled and wrongly charged, about 460,000. These numbers are subject to change, said Halimah Elmariah, a spokeswoman for Ms. James.
Intuit said in its statement that it already adheres to most of the advertising practices required by the settlement and “expects minimal impact on its business from implementing the remaining changes going forward.”
The company added that it expects to help 40 million taxpayers file their taxes for free over the next three years.