Turbo Tax To Pay Customers $141 Million For Misleading Free Tax-Filing Services

Intuit, the company that owns tax filing software TurboTax, has reached a settlement with all 50 states to pay $141 million for misleading customers about its free tax-filing services.

New York Attorney General Letitia James announced on Wednesday, according to a CNN report. The settlement indicates Intuit must also suspend its "free, free, free" ad campaign for falsely luring customers with the promise of free tax preparation services. It also stated that around 4.4 million customers were "unfairly charged."

In a statement, Intuit said that as part of the agreement, it "admitted no wrongdoing" and that the adjustments required in the future will have a "minimal impact" on its company.

A 2019 ProPublica report accused the firm of pushing eligible consumers away from federally supported tax filing services by making them harder to find in internet searches, instead of leading them to the company's paid filing services, according to James' office.

Filers who utilized TurboTax's Free Edition from 2016 to 2018 will receive a reimbursement of $30 for each year they were charged when they should have been able to use services for free.

Low-Income Americans Were the Victims

In a press release, James noted that "Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to."

She added that for years, the company "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," the attorney general said.

Intuit representatives stated in a blog Wednesday that the company agreed to pay $141 million "to put this matter behind it, and made certain commitments regarding its advertising practices."

As per documents obtained by ProPublica, executives at Intuit were aware that they were misleading customers by advertising free services that were not actually free to all customers, per US News.

An internal company PowerPoint presentation stated, "The website lists Free, Free, Free, and clients are assuming their return will be free. Customers are becoming upset."

Intuit Said It Was Fair to Customers

CBS News reported that Intuit spokesperson Derrick Palmer stated in an interview that "Intuit's free tax preparation offering has helped nearly 100 million Americans file their taxes completely free of charge" in the past eight years.

Palmer also claimed that the company is "clear and fair with our customers" and "transparent" in its advertising practices.

The spokesman added that Intuit's participation in the Free File program "was done in compliance and with the oversight of the IRS."

Intuit also pointed out a "government-run pre-filled tax preparation system" that makes the tax collector, who also functions as an investigator, inspector, and enforcer, the tax preparer is plagued with "conflicts of interest."

Free File, a collaboration between the IRS and commercial tax-preparation firms, was designed to allow roughly 70% of US taxpayers to file their taxes for free. As per IRS data, less than 3% of filers utilized Free File in the 2020 tax year.

Senator Elizabeth Warren has termed the program a failure and accused commercial tax-preparation corporations, such as TurboTax, of sabotaging it. In March, the Federal Trade Commission sued Intuit, alleging that the company's advertisements deceived consumers.