Turbotax users to get restitution

Company charged filers for returns that should have been free

An estimated 174,000 New Yorkers should be getting restitution of about $30 each from Turbotax, which charged people to file federal tax returns that should have been done for free.

Additionally, the company had blocked web searches that would have directed users to information about free tax filings offered by the federal government.

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” Attorney General Letitia James said. “For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable.”

Turbotax is a subsidiary of the Intuit financial software provider.

The agreement was reached with all 50 states and Washington, D.C.

The Empire State will receive $5.4 million as its share of the total $141 million in compensation the company will pay out nationwide.

Additionally, Turbotax will

suspend the “free, free, free” ad campaign.

James’ office opened an investigation into Intuit after the Propublica news outlet reported that the company was using deceptive digital tactics to steer low-income consumers toward its commercial products and away from federally supported free tax services.

Intuit offered two free versions of Turbotax. One was through its participation in the IRS Free File Program, a publicprivate partnership with the Internal Revenue Service, which allows taxpayers earning up to $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to taxpayers.

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 marketed this “freemium” product aggressively, including through ad campaigns where “free” is the most prominent or sometimes the only selling point. In some ads, the company repeated the word “free” dozens of times in as few as 30 seconds.

However, the Turbotax “freemium” product is only free for approximately one-third of U.S. taxpayers. In contrast, the IRS Free File products were free for 70 percent of taxpayers.

The attorney general’s office found that Turbotax used confusingly similar names for 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 blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers.

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.

Intuit will provide restitution to nearly 4.4 million consumers nationwide 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.

Affected consumers will automatically receive notices and a check by mail.

Intuit has also agreed to reform its business practices. That includes halting misrepresentations in connection with promoting or offering any online tax preparation products, and enhancing disclosures in its advertising and marketing of free products.

They also agreed to design their products to better inform users whether they will be eligible to file their taxes for free and refrain 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.

James led the investigation with Tennessee, with support from the attorneys general of Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Texas and Washington.