'Free' TurboTax offers weren't free, Intuit ordered to stop 'deceptive' ads

The government could make tax filing free and a lot easier for everyone if it wanted to.

There are all kinds of tax cheats, and they're not all taxpayers. According to the Federal Trade Commission, Intuit Inc. “engaged in deceptive advertising" for its TurboTax products and deceived consumers when it ran ads for “free” tax products and services for which many consumers were ineligible.

Of course, there are those like Sen. Elizabeth Warren (D-Mass.) who argue that all consumers should have be able to file their tax returns for free, courtesy of the U.S. government, which already has most of the information it needs to calculate everyone's tax.

“The average American spends 13 hours and $240 every year to file their taxes — that's too much time and too much money. This is the result of corporations like Intuit sabotaging the Free File program to rake in large profits," Warren said in a recent press release.

Warren last year introduced the Tax Filing Simplification Act of 2022, which she says would simplify the tax filing process for millions of Americans, saving them hours and hundreds of dollars.

In an initial decision in the TurboTax case, administrative Law Judge D. Michael Chappell issued an order requiring the company to cease-and-desist from engaging in the deceptive practices alleged in the complaint.  

Intuit also is barred from representing that any good or service is free, unless:

1) it is free for all consumers;

2) it clearly and conspicuously discloses any terms that would limit the offer and might be misunderstood by consumers; and

3) if the good or service is not free “to a majority of U.S. taxpayers,” this also must be disclosed in a clear and conspicuous manner.

Free, free, free

The ruling grows out of a complaint filed in March 2022, in which the FTC consumer protection staff alleged that Intuit was routinely deceiving consumers with ads for "free" tax filing services that, in fact, were not available to millions of consumers.

In the complaint, FTC staff alleged that the company’s ubiquitous advertisements touting their supposedly “free” products—some of which have consisted almost entirely of the word “free” spoken repeatedly—misled consumers into believing that they can file their taxes for free with TurboTax.

In fact, most tax filers can’t use the company’s “free” service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product, the FTC alleged.

A final decision will be issued after a review and a period during which appeals can be filed.

Really, really free

For really free filing, Sen. Warren and the cosponsors of her measure say the Internal Revenue Service should use the information it already has to help consumers fill in any blanks and complete the process quickly.

Along with lowering costs and eliminating red tape for all taxpayers, simplified filing tools would ensure that more eligible people – including millions of low-income Americans – receive important tax refunds, like the Child Tax Credit and Earned Income Tax Credit. According to recent polling, 77% of Americans support this legislation, according to Warren.