Intuit, the company that owns TurboTax, has agreed to pay US$141 million in restitution after an investigation found it deceived low-income Americans about their income tax filings.
New York’s attorney general announced Wednesday that TurboTax’s “free, free, free” ad campaign used misleading methods to lead low-income Americans away from free, federally supported programs, encouraging them to use the commercial service instead.
“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,” New York Attorney General Letitia James said in a statement.
“This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal.”
The ruling comes after an investigation that was prompted by ProPublica’s 2019 report that found that customers who signed up for the company’s free tax services were dinged by hidden fees later in the process.
“As part of the agreement, Intuit admitted no wrongdoing, agreed to pay $141 million to put this matter behind it, and made certain commitments regarding its advertising practices,” representatives for Intuit said in a blog post Wednesday. “Intuit already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward.”
Until last year, Intuit offered two free versions of TurboTax. One was through its participation in the Internal Revenue Service’s Free File Program, geared toward taxpayers earning roughly $34,000 and members of the military. Intuit withdrew from the program in July 2021, saying in a blog post that the company could provide more benefits without the program’s limitations.
The company also offers a commercial product called “TurboTax Free Edition” that is only for taxpayers with “simple returns,” as defined by Intuit.
According to documents obtained by ProPublica, Intuit executives knew they were deceiving customers by advertising free services that were not in fact free to everyone.
“The website lists Free, Free, Free and the customers are assuming their return will be free,” said an internal company PowerPoint presentation. “Customers are getting upset.”
According to James’ office, 33 per cent of U.S. taxpayers qualified for the “TurboTax Free Edition,” compared with 70 per cent of taxpayers qualifying for a free program offered by the IRS.
However, James said the company used “several deceptive and unfair trade practices” to direct people away from the IRS program, including hiding its free filing page from search engines and buying online ads to guide people away from the federal filing system.
The New York Times reports that qualifying Americans will be notified automatically and paid approximately $30 for each year that they paid for TurboTax.
The settlement affects Americans in all 50 states and the District of Columbia.
— With files from The Associated Press