States settle with Intuit over TurboTax services

MIssissippi to receive over $1 million to TurboTax customers

Mississippi Attorney General Lynn Fitch has secured $1,085,417.08 from the owner of TurboTax, Intuit Inc. (Intuit), for deceiving consumers into paying for tax services that should have been free. As a result of a multistate agreement including all 50 states and the District of Columbia, 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 for services.

 “Over 35,000 Mississippians were misled into paying for tax filing services that should have been free,” said Attorney General Lynn Fitch. “And the deceived consumers were primarily those who could least afford to make this unnecessary payment. I am pleased that with this settlement, not only will those consumers get back some of their money, but Intuit will put an end to its deceptive marketing practices.”

A multistate investigation found that Intuit 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 was through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service (IRS), which allows taxpayers earning roughly $34,000 and members of the military to file their taxes for free. In addition, Intuit offers a commercial product called “TurboTax Free Edition,” which is only free for taxpayers with “simple returns” as defined by Intuit. In recent years, TurboTax has marketed this “freemium” product aggressively. However, the TurboTax “freemium” product is only free for approximately one-third of US taxpayers. In contrast, the TurboTax IRS Free File product was free for 70 percent of taxpayers. Intuit withdrew from the IRS Free File program in July 2021.

The multistate investigation found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program. For example, 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 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 a total of $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 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.

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.

Mississippi consumers who believe they are eligible but do not receive notification should contact the Attorney General’s Office Consumer Protection Division at 601-359-3680 or consumer@ago.ms.gov.