FTC Rules TurboTax Engaged in Deceptive Advertising, Bans Free Services
The Federal Trade Commission (FTC) has made a final ruling against TurboTax, the popular tax filing software, stating that the company engaged in deceptive advertising. As a result, TurboTax is now banned from advertising its services for free unless it truly is free for all customers. The FTC found that TurboTax’s ads for “free” tax services were misleading and deceived consumers.
The FTC had initially filed a lawsuit against Intuit, the owner of TurboTax, in 2022, accusing the company of deceptive advertising. The FTC staff argued that most tax filers were not eligible for TurboTax’s “free” services, such as those who received a 1099 form for gig economy work or farm income. By advertising their products as free, TurboTax misled these customers.
In September, the FTC Administrative Law Judge D. Michael Chappell announced the initial decision, which was upheld by the commission on Monday. Intuit had appealed to the FTC during the process but was unsuccessful. In response to the ruling, Intuit stated that it has appealed the decision to a federal circuit court outside of the FTC, calling the decision “deeply flawed.”
The FTC’s ruling prohibits Intuit from advertising or marketing any goods or services as free unless they are genuinely free for all customers. Additionally, TurboTax must clearly disclose the percentage of customers who actually qualify for the free service, close to the “free” claim advertised. If the service is not free for the majority of consumers, TurboTax must state this as well. The FTC also ordered Intuit to clearly and conspicuously disclose all the terms, conditions, and obligations required to obtain the “free” service.
Furthermore, the FTC’s order prevents Intuit from misrepresenting any material facts about its products or services, including price, refund policies, and consumers’ ability to claim tax credits or deductions or file their taxes accurately online without using TurboTax’s paid service.
This ruling comes after a 2019 ProPublica report that accused TurboTax of steering eligible clients away from free tax-filing services supported by the federal government. The report claimed that TurboTax made these services difficult to find in web searches, instead directing users towards the paid version of their filing services. As a result, approximately 4.4 million people were set to receive checks from TurboTax last May, following a 50-state settlement with Intuit.
New York Attorney General Letitia James expressed her satisfaction with the ruling, stating that TurboTax’s deceptive marketing had cheated millions of low-income Americans who were trying to fulfill their legal duty to file their taxes. James emphasized that the ruling would put money back into the pockets of hardworking taxpayers who should have never had to pay to file their taxes.
In conclusion, the FTC’s ruling against TurboTax for deceptive advertising has significant implications for the company’s future marketing practices. The ban on advertising free services unless they are genuinely free for all customers and the requirement to clearly disclose eligibility criteria will ensure greater transparency for consumers. This ruling serves as a reminder to companies that they must accurately represent their products and services to avoid misleading customers.
