TurboTax to Refund Up to $141 Million to Taxpayers Who Paid for Services That Were Free – NBC New York (47)

Intuit, the parent company of TurboTax, will pay $141 million in restitution to millions of taxpayers across the country who were wrongfully charged for tax services that should have been free, said New York Attorney Letitia James.

In addition, the company must also discontinue TurboTax’s “free, free, free” advertising campaign that lured customers with promises of free tax preparation services, only to trick them into paying, according to a news release.

The announcement sent shares of Intuit plummeting 1.7% in morning trading on Wednesday, according to a MarketWatch report.

All 50 states and the District of Columbia have signed the agreement. New York will receive more than $5.4 million for more than 176,000 New Yorkers who were tricked into paying to file their federal income tax return, James said.

As part of the multi-state settlement, more than 70,000 New Jersey taxpayers will split $2.15 million in restitution to settle claims.

“Intuit misled millions of low-income Americans into believing they would receive free tax filing services to which they were entitled,” James said in a statement released Wednesday.

“For years, Intuit defrauded the most vulnerable among us for profit. Today, every state in the nation is holding Intuit accountable for defrauding millions of taxpayers, and we’re putting millions of dollars back into the pockets of affected Americans. The Settlement It should serve as a reminder to businesses large and small that engage in these deceptive marketing tactics that it is illegal. New Yorkers can count on my office to protect their wallets from white-collar fraudsters.”

The New York State Attorney General’s Office opened an investigation into Intuit after ProPublica reported that the company was using deceptive digital tactics to lure low-income consumers to its commercial products and away from free government-backed tax services. federal.

Intuit offered two free versions of TurboTax. One was through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service (IRS), which allows taxpayers earning up to approximately $34,000 and members of the military to file their taxes. for free. In exchange for participating in the program, the IRS has agreed not to compete with Intuit and other tax preparation companies by providing its own electronic tax preparation and filing services to US taxpayers.

Additionally, Intuit offers a commercial product called “TurboTax Free Edition,” which is only free to “simple return” taxpayers, as defined by Intuit. In recent years, TurboTax has aggressively marketed this “freemium” product, including through advertising campaigns in which “free” is the most prominent, or sometimes the only, selling point. In some ads, the company repeated the word “free” dozens of times in just a 30-second ad. However, TurboTax’s “freemium” product is only free for about a third of US taxpayers. In contrast, IRS Free File products were free to 70 percent of taxpayers.

The multistate investigation found that Intuit engaged in several deceptive and unfair business 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. Intuit bid on paid search ads to direct consumers searching for the IRS Free File service to the “freemium” TurboTax product.

Intuit also deliberately blocked its IRS Free File home page from search engine results during the 2019 filing season, effectively preventing eligible taxpayers from filing their taxes for free. Additionally, TurboTax’s website included a “Products and Pricing” page that said it would “recommend the right tax solution,” but never displayed or recommended the IRS Free File program, even when consumers were not eligible for the product.” freemium”.

Intuit will pay $141 million in restitution, of which approximately $2.5 million will be used for administrative fund costs.

Under the settlement, Intuit will provide restitution to nearly 4.4 million consumers who started using TurboTax Free Edition for tax years 2016 through 2018 and were told they had to pay to file even though they met the filing criteria. for free through the IRS Free File program, offered through TurboTax. Consumers are expected to receive a direct payment of approximately $30 for each year that they were tricked into paying for filing services. Affected consumers will automatically receive notices and a check in the mail.

Intuit has also agreed to reform its business practices, including:

• Refrain from making false statements in connection with the promotion or offer of any online tax preparation product.
• Improve disclosures in your advertising and marketing of free products.
• Design products to better inform users if they qualify to file their taxes for free.
• Refrain from requiring consumers to start their tax return again if they switch from one of Intuit’s paid products to use a free product instead.

Intuit withdrew from the IRS Free File program in July 2021.

James led the multistate investigation with support from the attorneys general of Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas and Washington. All 50 states and the District of Columbia joined this agreement.

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