Agreement Resolves Allegations TurboTax Owner Intuit Deceived Low-Income Americans Into Paying for Free Tax Services
Chicago – Attorney General Kwame Raoul today announced more than $4 million in relief for Illinois consumers who were deceived into paying for tax services that were available for free. As a result of a bipartisan agreement between all 50 states and the owner of TurboTax, Intuit Inc. (Intuit), Intuit will pay $141 million as restitution to millions of Americans, including more than 130,000 in Illinois. In addition, Intuit must end its TurboTax “free, free, free” ad campaign that lured customers with promises of free tax preparation services, only to mislead them into paying.
“Intuit attracted customers to TurboTax with promises of free tax preparation services, leaving people to learn the hard way that those services were anything but free,” Raoul said. “This settlement holds Intuit accountable for intentionally deceiving taxpayers who were simply seeking an affordable option to help them navigate what can be the daunting process of filing their taxes.”
States opened an investigation into Intuit following reports that the company was using deceptive digital tactics to steer low-income consumers toward its commercial products and away from federally-supported free tax services.
Intuit has offered two free versions of TurboTax. One version was offered 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 $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to American taxpayers.
In addition to the TurboTax Free File version, Intuit offers TurboTax Free Edition, a commercial product that is free for only those taxpayers who file “simple returns,” as defined by Intuit. In recent years, TurboTax has marketed this “freemium” product aggressively, including through ad campaigns where “free” is the most prominent or sometimes the only selling point. In some ads, the company repeated the word “free” dozens of times in as little as 30 seconds. However, the TurboTax “freemium” product is free for only approximately one-third of U.S. taxpayers. In contrast, the TurboTax Free File product was free for 70% of taxpayers.
The states’ investigation found that Intuit engaged in several deceptive and unfair trade 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 advertisements to direct consumers who were looking for the IRS Free File product to the TurboTax “freemium” product instead. Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively preventing eligible taxpayers from filing their taxes for free. Moreover, TurboTax’s website included a “Products and Pricing” page that stated it would “recommend the right tax solution.” However, the page never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.
Under the agreement, Intuit will pay $141 million in restitution, of which roughly $2.5 million will be used for administrative fund costs. Specifically, Intuit will provide restitution to millions of consumers who started using 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 version of TurboTax offered as part of the IRS Free File Program. Consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services. Impacted consumers will automatically receive notices and a check by mail.
In addition to stopping its TurboTax “free, free, free” ad campaign, Intuit has also agreed to reform other aspects of its business practices, including:
- Refraining from making misrepresentations in connection with promoting or offering any online tax preparation products.
- Enhancing disclosures in its advertising and marketing of free products.
- Designing its products to better inform users whether they will be eligible to file their taxes for free.
- Refraining from requiring consumers to start their tax filing over if they exit one of Intuit’s paid products to use a free product instead.
Intuit withdrew from the IRS Free File program in July 2021.