Intuit reaches settlement with US users over ‘free’ TurboTax claimsby
Up to 4.5m American taxpayers will receive restitution from TurboTax owner Intuit as part of a $141m settlement, following claims that low-income taxpayers were duped into paying to file their annual taxes when the service should have been free.
The settlement follows an investigation and lawsuit involving all 50 US states and the District of Columbia. The investigation was initiated following reports by non-profit campaigning site Propublica that claimed to have found evidence that Intuit executives knew they were deceiving customers through their advertising.
Worth $141m (£113m), the settlement announced yesterday covers those who paid to file with TurboTax for the 2016–18 tax years, despite being eligible for the free version of the tool offered through the IRS Free File program. This is a partnership with the federal government under which Intuit and other providers allowed selected low-income taxpayers to file at no charge. Intuit withdrew from Free File in July 2021.
Used by an estimated 40m US citizens a year to file annual tax returns, TurboTax helps with the completion of government forms, submits the documents electronically and estimates taxpayer refunds or rebates.
Not really free
The TurboTax Free Edition promised taxpayers with simple tax affairs they could use the software at no cost and was accompanied by a marketing campaign that repeated the words “free free free” in the style of an auctioneer or racing commentator.
However, after users completed the forms using the free version, they were told they needed to pay to use the Premium or Deluxe versions in order to submit their claims. According to New York Attorney General Letitia James, who led the lawsuit against Intuit, more than 4.4m people earning less than $34,000 mistakenly used the paid program.
Intuit will automatically compensate users who paid to file through TurboTax software despite being eligible for the free version to the tune of $30 per applicable year. The company will not face further fines in addition to the restitution paid to TurboTax users.
In a statement accompanying the settlement, Attorney General James said millions of low-income workers should have been able to file their taxes for free. “For years, Intuit misled the most vulnerable among us to make a profit,” she said. “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. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal.”
According to the New York Attorney General’s statement, Intuit must also suspend TurboTax’s “free, free, free” ad campaign.
Responding to the agreement in a statement entitled Taxpayer Empowerment, Intuit admitted no wrongdoing but said it had agreed to the payment to “put this matter behind it”.
Kerry McLean, the company’s executive vice president, said Intuit was pleased to have reached a resolution on the issue. “Intuit is clear and fair with its customers, including with the nearly 100m Americans who filed their taxes free of charge with our products over the last eight years — more than all other tax prep software companies combined. In coming to a resolution on this matter, we admitted no wrongdoing and are pleased to be able to continue our strong partnership with governments to best serve the needs of taxpayers across the country.”
The news foreshadows worries expressed by the UK accounting community about the free software offerings the UK government has committed to as part of the next phase of its Making Tax Digital project.
For the income tax self assessment part of the scheme, free software is a stated ministerial commitment. However, with a continuing lack of clarity around the requirements for both vendors and taxpayers, there are fears that not everyone entitled to file for free will end up doing so.