Select TurboTax users can expect to receive a little extra money after the tax software developer's parent company entered a settlement with all 50 states' attorneys general on Wednesday.
Intuit, the owner of TurboTax, agreed to pay $141 million in restitution to 4.4 million consumers who were charged for using a TurboTax service when they were told it was free. The agreement also requires Intuit to suspend TurboTax’s “free, free, free” ad campaign, according to a statement from New York Attorney General Letitia James.
“For years, Intuit misled the most vulnerable among us to make a profit," James's statement read. "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. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal."
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The company admitted no wrongdoing in entering the agreement, agreed to pay the $141 million "to put this matter behind it," and expects "minimal impact to its business from implementing the remaining changes going forward," Intuit wrote in a statement.
Intuit offered two free versions of TurboTax, including one through its participation in the IRS Free File program, a partnership with the Internal Revenue Service that allows taxpayers earning roughly $34,000 and members of the military to file their taxes for free. The other version, called “TurboTax Free Edition,” was only free for taxpayers with “simple returns,” as defined by Intuit.
The investigation by James found that Intuit engaged in practices that limited consumers’ participation in the IRS Free File program, which included directing consumers looking for the IRS Free File service to its Free Edition instead and purposefully blocking the IRS Free File landing page from search engine results during the 2019 tax filing season. Intuit withdrew from the IRS Free File program in July 2021.
The agreement requires Intuit to provide restitution to consumers who used TurboTax’s Free Edition for tax years 2016 through 2018 and were told that they had to pay to file even though they were eligible to file for free using the IRS Free File program. Consumers are expected to receive a direct payment of approximately $30 for each year they were deceived into paying for filing services and will automatically receive notices and a check by mail.
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The company was sued by the Federal Trade Commission in March 2022 for allegedly deceptively advertising that its services were free.