WI DOJ Obtains $2,370,000 in Restitution for Wisconsin Consumers Duped by Turbo Tax.

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Madison, Wisconsin The Wisconsin Department of Justice obtained $2,370,000 from Intuit Inc. (Intuit), the owner of TurboTax, for misleading consumers into paying for free tax services. As a result of a multistate agreement, Intuit will pay $141 million in restitution to millions of unjustly charged consumers across the country.

 

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In addition, Intuit must suspend its “free, free, free” advertising campaign for TurboTax, which deceived customers into paying for services by luring them with the promise of free tax preparation services. Each of the fifty states and the District of Columbia have signed the accord. More than $2,370,000 will be refunded to the state of Wisconsin for consumers who were duped into paying to file their federal tax returns.

“More than 76,000 Wisconsinites ultimately paid for ‘free’ tax preparation products,” according to Attorney General Josh Kaul. It is unethical for a corporation to use deceptive tactics to profit from individuals who pay taxes.

ProPublica reported that Intuit used deceptive digital tactics to steer low-income consumers toward its commercial products and away from federally-supported free tax services, prompting an investigation into the company.

Intuit has provided two complimentary versions of TurboTax. One was through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service (IRS) that enables taxpayers earning approximately $34,000 and military personnel to file their taxes for free. In exchange for participation in the program, the IRS agreed not to offer its own electronic tax preparation and filing services to U.S. taxpayers.

In addition, Intuit offers a commercial product called “TurboTax Free Edition,” which is free only for taxpayers who file “simple returns” as defined by Intuit. In recent years, TurboTax has marketed this “freemium” product aggressively, including through ad campaigns where “free” is the most prominent or sometimes the only selling point. In some 30-second advertisements, the company repeated the word “free” dozens of times. However, the “freemium” version of TurboTax is only free for about one-third of U.S. taxpayers. The TurboTax IRS Free File product, in contrast, was free for 70% of taxpayers.

According to the multistate investigation, Intuit engaged in a number of deceptive and unfair business practices that restricted consumer participation in the IRS Free File Program. Both the company’s IRS Free File and “freemium” products had names that were too similar to avoid confusion. Intuit purchased paid search advertisements to redirect consumers searching for the IRS Free File product to the “freemium” version of TurboTax. During the 2019 tax filing season, Intuit blocked its IRS Free File landing page from search engine results, effectively preventing eligible taxpayers from filing their taxes for free. In addition, 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, even for consumers who were ineligible for the “freemium” product.

Intuit will pay a total of $141 million in restitution, of which approximately $2.5 million will be used to cover administrative fund expenses.

Under the terms of the settlement, Intuit will compensate millions of customers who used TurboTax’s Free Edition for tax years 2016 through 2018 and were told they had to pay to file, despite being eligible to file for free using the version of TurboTax provided as part of the IRS Free File program. It is anticipated that consumers will receive a direct payment of roughly $30 for each year they were duped into paying for filing services. Affected consumers will receive notices and a check in the mail.

In addition, Intuit has agreed to reform the following business practices:

Refraining from making misrepresentations in connection with promoting or offering any online tax preparation products; Increasing disclosures in its advertising and marketing of free products; Designing its products to better inform users whether they are eligible to file their taxes for free; and Refraining from requiring consumers to restart their tax filing if they switch from one of Intuit’s paid products to a free product.

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In July 2021, Intuit withdrew from the IRS Free File program.

The multistate investigation was led by New York and Tennessee, with assistance from the attorneys general of Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Texas, and Washington. Each of the fifty states and the District of Columbia joined this accord. The states would like to express their gratitude to the Federal Trade Commission for its assistance with the investigation.

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