'Free' Tax Claims Spell $141 Million Penalty for Intuit's TurboTax

'Free' Tax Claims Spell $141 Million Penalty for Intuit's TurboTax

Just a few weeks ago, Sen. Elizabeth Warren (D-MA) skewered Intuit for the “free, free, free” ad campaign for its TurboTax subsidiary. Now the company has agreed to pay $141 million to customers who were deceived by misleading promises of free tax-filing services.

New York Attorney General Letitia James announced the settlement, which was signed by the attorneys general of all 50 states.

“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 in a statement.

The Federal Trade Commission also filed a complaint against Intuit, charging that the company’s ads led customers to think they could file their taxes for free with TurboTax.  

IRS Free File

The attorneys generals’ investigation found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program.

The company used confusingly similar names for both 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.

The AGs said Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free.

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, even when consumers were ineligible for the “freemium” product.

“Adroit influence-peddling”

Sen. Warren said Intuit’s use of high-priced lobbyists, including former FTC commissioner Jon Leibowitz, helped it evade prosecution for years.

“Intuit has gotten away with these Free File scams thanks to extensive lobbying and adroit influence-peddling – including repeated use of revolving door hires,” she said in a letter to Intuit. She said Intuit’s lobbying program topped $3.2 million in 2021, focusing on opposing automatic filing that would expand free tax preparation services and putting up roadblocks for any proposed consumer protections.