Intuit, the owner of popular tax-filing software TurboTax, will pay $141 million in restitution to millions of low-income Americans who were “unfairly charged” for services that should have been free, according to a multistate agreement announced Wednesday.
TurboTax also agreed to reform its business practices. For example, it must suspend a “free, free, free” advertising campaign that “lured” customers with the promise of free tax preparation but then asked them to pay, according to an announcement from New York Attorney General Letitia James.
All 50 states and the District of Columbia have signed the agreement.
Intuit will pay restitution to nearly 4.4 million consumers who used TurboTax’s Free Edition during tax years 2016 through 2018. These customers were told that they had to pay for the service despite being eligible to file for free via the IRS Free File program offered through TurboTax, according to the announcement.
Consumers are expected to receive about $30 for each year they paid for services, the announcement said. Consumers will automatically receive notices and a check by mail.
An Intuit spokesperson didn’t immediately return a request for comment.
“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” James said in a statement. “For years, Intuit misled the most vulnerable among us to make a profit. 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.”
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Until recently, Intuit offered two free versions of TurboTax. One was through the IRS Free File Program, a public-private partnership that lets low-income Americans file their taxes for free. Intuit ended its participation in July 2021. (It had been available to taxpayers with income below about $39,000, according to an earlier complaint from the Federal Trade Commission.)
Intuit aggressively marketed another version (the TurboTax Free Edition) as “free,” but it’s only free for taxpayers with “simple” returns as defined by Intuit, according to the announcement. Users without a simple return must upgrade to a paid version of the tax service.
(For tax-year 2021, Intuit refers to a simple return as one that can be filed on a Form 1040 with limited attached schedules, like one that includes student-loan interest paid, according to the FTC.)
The service would be free for about one-third of U.S. taxpayers, while the IRS Free File products are free for about 70%, according to the announcement.
This is a developing story. Check back for updates.