Lawsuit: Intuit tricked consumers into buying expensive versions of TurboTax
Company accused of hiding free tax software programs
TurboTax maker Intuit deceived taxpayers into paying for expensive tax preparation software the company promised would be free, according to a lawsuit filed Friday by the Santa Clara County Counsel.
The majority of taxpayers — in the 2018 tax season, all those whose adjusted gross income was $66,000 or less — are eligible to file their taxes for free using software from the dozen tax preparation providers that are part of the Free File Alliance, a partnership between providers and the IRS.
But, the complaint alleges, Intuit steered consumers toward expensive versions of TurboTax while manipulating search engine results to hide its own free alternatives. As a result, while 70% of taxpayers are eligible to file for free, only 2.5% actually do.
“Through predatory and deceptive actions, Intuit has made hundreds of millions of dollars in unfair profits on the backs of California taxpayers,” said Santa Clara County Counsel James R. Williams.
Intuit disputed these claims through spokesman Rick Heineman.
“Intuit is committed to offering free tax preparation services as demonstrated by more people filing their taxes for free with TurboTax than all other tax prep software companies combined,” he wrote.
Last year, nearly 1.2 million taxpayers filed specifically with the TurboTax IRS Free File service, according to a blog post on Intuit’s website. Over the past five years, 55 million taxpayers have filed returns through TurboTax
without paying anything.
“When Intuit has an opportunity to respond to these allegations in court, it will be shown that Intuit has at all times been clear and fair with its customers,” Heineman added.
The complaint, the latest in a series of civil cases filed against Intuit and other tax preparation services, seeks a court order that would force Intuit to pay restitution to the taxpayers it had “unfairly charged” for tax preparation services, as well as civil penalties to discourage it from similar
“The upgrade had nothing to do with ‘accuracy’ and was instead designed to maximize Intuit’s profits.” —Alex Butcher-Nesbitt, county spokesman
behavior in the future.
The alleged deception worked in two parts, the lawsuit says: Intuit would promise consumers they could file their taxes with TurboTax “for $0” or “free free free.” But in most cases, the suit says, consumers who clicked “File for 0” and spent hours entering their tax identification were then told they needed to pay upwards of $100 or upgrade to another version of TurboTax to “accurately file” their taxes.
“The upgrade had nothing to do with ‘accuracy’ and was instead designed to maximize Intuit’s profits,” county spokesman Alex Butcher-Nesbitt wrote in a news release.
And while Intuit, as part of an agreement with the IRS, does offer a truly free tax preparation product, the company made it difficult to find by leaving it off Google search results and product listings on its website,
the complaint alleges.
On its website, Intuit writes that it distributed search engine-optimized online content about Free File and increased paid searches for Free File by 80% in 2019 compared with 2018. More taxpayers found the service through online search in 2019 compared with 2018 as well, although Intuit did not disclose how many taxpayers
that statistic includes.
The case, brought by the Santa Clara County Counsel on behalf of the people of California, is the latest in a series of lawsuits brought against Intuit and H&R Block after a ProPublica investigation laid out how tax preparation providers have “worked against making tax preparation easier and less costly,” lobbying against free, simple filing
and “deceiv(ing) customers who should qualify for the Free File product.”
In May, plaintiffs in San Jose filed a national classaction suit against Intuit on behalf of all taxpayers who were eligible to use free filing software but were charged anyway.
The Los Angeles city attorney also filed suit against the company that month.