Intuit owes you money if it tricked you into paying for TurboTax “Free Edition”.

Intuit, the company behind TurboTax, has agreed to pay out $141 million after “cheating millions of low-income Americans out of free tax filing services,” as New York Attorney General Letitia James puts it. Most of the money will go to consumers who have been tricked into paying for its service. This is the result of an agreement with the AG (and officials from all 50 states and DC) that also requires the company to change its marketing practices.

According to the Attorney General’s press release, Intuit owes people $30 for each year they were tricked into paying TurboTax between 2016 and 2018. The document notes that “affected consumers will automatically receive notifications and a check in the mail.”

TurboTax has long been vilified as opaque and with deceptive marketing. For years, there were two versions of his tax preparation software that had “free” in their names: TurboTax Free Edition and TurboTax Free File. According to the AG, Intuit heavily marketed the Free Edition as, well, free (the press release notes that some ads used the word “dozens of times in just 30 seconds”). But around 4.4 million people owed Intuit money for using it.

What they should have been using was the hard-to-find Free File version that was part of the Internal Revenue Service’s Free File program. The program grew out of a partnership between the government and tax companies, which included Intuit. It should ensure that the majority of Americans have access to a free version of tax preparation software like TurboTax. As the press release notes, it also prevented the IRS from creating its own competing service.

Intuit ended participation in Free File in 2021, citing “limitations” and “conflicting requests from people outside the program.” This came after the IRS changed the program’s rules and banned tax companies from hiding their supposedly free products from search engines (something Intuit and H&R Block were reportedly doing). The rule change also allowed the IRS to create its own free filing system, but so far it hasn’t done so.

Intuit’s involvement in the program has come under scrutiny from lawmakers such as Senator Elizabeth Warren (D-MA). Last month, Warren sent a letter to the company accusing it of “working to protect its shady business practices.” The letter also states that TurboTax products “make American taxpayers pay for services that should be free.”

Consumers won’t get the full $141 million — the AG’s press release said “approximately $2.5 million will be used for administrative expenses.” Aside from agreeing to distribute the money, Intuit has also said it will:

  • Stop misrepresenting its online tax prep products
  • Improve disclosures in its ads and marketing for its free products
  • In TurboTax itself, make it clearer if you are eligible for a free filing
  • Don’t let customers start over when they switch from a paid product to a free product

The points about advertising are particularly interesting given that the Federal Trade Commission recently sued the company for using the word “free” to “instantly stop false advertising from Intuit.” The FTC’s complaint, filed in March, says a hearing on the matter is scheduled for September. Intuit owes you money if it tricked you into paying for TurboTax “Free Edition”.

Fry Electronics Team

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