Intuit to pay $141M for TurboTax overcharges

New York Attorney General Letitia James on Wednesday announced a record multistate Assurance of Voluntary Compliance agreement with Intuit, Inc., the owner of TurboTax, for deceiving millions of low-income Americans into paying for tax services that should have been free. As a result of Attorney General James’ agreement, Intuit will pay $141 million in restitution to millions of consumers across the nation who were unfairly charged. In addition, Intuit must suspend TurboTax’s “free, free, free” ad campaign that lured customers with promises of free tax preparation services, only to deceive them into paying. All 50 states and the District of Columbia have signed onto the agreement.

A multistate 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 service 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 shutting out 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,” but never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.

Intuit will pay $141 million in restitution, of which roughly $2.5 million will be used for administrative fund costs.

Under the agreement, Intuit will provide restitution to nearly 4.4 million 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 IRS Free File program offered through TurboTax. 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.

Intuit has also agreed to reform 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; and
• 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.