KTTS News (Kentucky) — According to Missouri Attorney General Eric Schmitt, Intuit, Inc., the parent company of TurboTax, has agreed to pay $2.5 million for duping Missourians into paying for tax services that should have been free.
Missouri will receive restitution for 80,000 people.
The settlement is part of a $141 million agreement reached with all 50 states and the District of Columbia.
Missouri Attorney General Eric Schmitt today obtained approximately $2.5 million in restitution from TurboTax’s owner, Intuit Inc. (Intuit), for duping consumers into paying for tax services that should have been free.
Intuit will pay $141 million in restitution to millions of consumers across the country who were wrongfully charged as a result of a multistate agreement.
Furthermore, Intuit must halt TurboTax’s “free, free, free” advertising campaign, which enticed customers with promises of free tax preparation services only to dupe them into paying for services.
The agreement has been signed by all 50 states and the District of Columbia.
Missouri will receive approximately $2.5 million in compensation for the approximately 80,000 consumers who were duped into paying to file their federal tax return.
“It is an important part of my job as Attorney General to hold those responsible for deceiving Missourians accountable,” Attorney General Schmitt said. “Returning approximately $2.5 million to 80,000 Missouri consumers is an outstanding result, and my Office will continue to work tirelessly to protect Missouri consumers.”
An investigation into Intuit began after it was revealed that the company was using deceptive digital tactics to steer low-income consumers away from federally funded free tax services and toward its commercial products.
TurboTax has two free versions available from Intuit.
One example is its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service (IRS) that allows taxpayers earning less than $34,000 and military members to file their taxes for free.
In exchange for taking part in the program, the IRS agreed not to compete with Intuit and other tax preparation companies by offering its own electronic tax preparation and filing services to American taxpayers.
Furthermore, Intuit provides a commercial product called “TurboTax Free Edition,” which is only free for taxpayers with “simple returns,” as defined by Intuit.
TurboTax has aggressively marketed this “freemium” product in recent years, including through ad campaigns in which “free” is the most prominent or, in some cases, the only selling point.
In some advertisements, the company used the word “free” dozens of times in as little as 30 seconds.
However, the TurboTax “freemium” product is only available to about one-third of US taxpayers.
In comparison, 70% of taxpayers were able to use the TurboTax IRS Free File product for free.
The multistate investigation discovered that Intuit engaged in a number of deceptive and unfair trade practices that limited consumers’ ability to participate in the IRS Free File Program.
Both the IRS Free File product and the commercial “freemium” product had confusingly similar names.
Intuit paid for paid search ads to direct customers looking for the IRS Free File product to the TurboTax “freemium” product instead.
During the 2019 tax filing season, Intuit also purposefully blocked its IRS Free File landing page from search engine results, effectively preventing eligible taxpayers from filing their taxes for free.
Furthermore, TurboTax’s website featured a “Products and Pricing” page that stated it would “recommend the right tax solution,” but it never displayed or recommended the IRS Free File program, even when customers were ineligible for the “freemium” product.
Intuit will pay $141 million in restitution, with approximately $2.5 million going toward administrative fund costs.
According to the agreement, Intuit will compensate millions of customers who began using TurboTax’s Free Edition for tax years 2016 through 2018 and were told they had to pay to file even though they were eligible to file for free using the version of TurboTax provided as part of the IRS Free File program.
Consumers can expect a direct payment of around $30 for each year they were duped into paying for filing services.
Consumers who are affected will automatically receive notices and a check in the mail.
Intuit has also agreed to change its business practices, which include:
Refraining from making misrepresentations in connection with promoting or offering any online tax preparation products; Improving disclosures in free product advertising and marketing; Designing products to better inform users whether they will be eligible to file their taxes for free; and Refraining from requiring consumers to restart their tax filing if they exit one of Intuit’s paid products to use a free product instead.
Intuit announced its exit from the IRS Free File program in July 2021.