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Intuit to Refund $141 Million to Users Over False Advertising

Intuit will pay restitution to nearly 4.4 million taxpayers and halt TurboTax's 'free, free, free' ad campaign

Intuit, the company that owns the TurboTax tax-filing program, is set to pay $141 million to customers in the United States who were deceived by misleading advertising that proclaimed a free tax-filing service.

New York’s attorney general, Letitia James, made the announcement on Wednesday.

The settlement was signed by the attorneys general of all 50 states. Under the terms of the settlement, the California-based software company Intuit will pay restitution to nearly 4.4 million taxpayers. It will also halt TurboTax’s “free, free, free” ad campaign.

James opened an investigation into Intuit after ProPublica reported that the software company was using deceptive tactics to steer consumers toward its commercial products and away from federally-funded free tax services.

Intuit has offered two free versions of TurboTax, which the company advertised in its “free, free, free” ad campaign. 

One version was available through its participation in the Internal Revenue Service’s Free File Program, geared toward taxpayers earning less than $34,000 and military members. Intuit withdrew from the government program in July 2021. 

The second is a commercial product called “TurboTax Free Edition” that is only for taxpayers with “simple returns,” as defined by Intuit.

ProPublica published a report about how TurboTax uses deceptive design and misleading advertising to trick lower-income taxpayers into paying to file their taxes, despite being eligible for free filing services.

After additional investigation, it was discovered that Intuit was adding code to its website and advertising that was hiding the free filing services from internet users. 

Intuit accomplished the task by adding code on its site telling Google and other search engines not to list TurboTax Free File in online search results.

The code used by Intuit can be found in a file called robots.txt or in an HTML tag. The code must be directly added to a site. It is commonly used on pages that developers want to hide. Google and other search engines will add a site to their search results without that code.

This discovery led James to file her suit against the company and seek restitution for users. 

“For years, Intuit misled the most vulnerable among us to make a profit. Today, 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,” James said. “This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal.”

Intuit will pay restitution to nearly 4.4 million consumers who used TurboTax’s Free Edition during tax years 2016 through 2018. Users can expect to receive about $30 for each year they paid for the company’s services. 

Free File, which is a partnership between the IRS and commercial tax-preparation companies, was intended to allow about 70% of U.S. taxpayers to file their annual tax returns at no cost. However, far fewer taxpayers have used Free File than expected. 

Multiple senators, led by Senator Elizabeth Warren, previously called for an investigation into Intuit and other tax preparation services for this deceptive and misleading practice, keeping taxpayers from the free filing option. The group sent a letter to the Federal Trade Commission (FTC) asking the agency to investigate whether tax companies engage in unfair and deceptive practices. The letter noted that at least five companies used similar tactics and cited antitrust law banning “conspiracy in restraint of trade.”

In March, the FTC sued Intuit, alleging that their ads misled consumers.

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