LOUISVILLE, Ky. (WDRB) -- The company behind TurboTax will fork over $141 million to customers, $1.6 million of which will go to Kentucky tax filers.
The settlement stems from a 2019 report that shed light on TurboTax steering people away from using its federally-supported tax-filing products by making it more difficult to find in web searches, causing many to use the paid version.
Kentucky Attorney General Daniel Cameron joined other attorneys general in a multistate investigation following the release of the report, spearheaded by New York Attorney General Letitia James.
The investigation revealed TurboTax's parent company, California-based Intuit Inc., "engaged in several deceptive and unfair trade practices that limited consumers' participation in the IRS Free File Program," by using "confusingly similar names for both its IRS Free File product and its commercial 'freemium' product," Cameron said in a news release Wednesday.
Until last year, Intuit offered two free versions of TurboTax. One was through its participation in the Internal Revenue Service's Free File Program, geared toward taxpayers earning roughly $34,000 and members of the military. Intuit withdrew from the program in July 2021, saying in a blog post that the company could provide more benefits without the program's limitations.
The company also offers a commercial product called “TurboTax Free Edition” that is only for taxpayers with “simple returns,” as defined by Intuit.
According to documents obtained by ProPublica, Intuit executives knew they were deceiving customers by advertising free services that were not in fact free to everyone.
“The website lists Free, Free, Free and the customers are assuming their return will be free,” an internal company PowerPoint presentation said. “Customers are getting upset.”
Under the terms of a settlement signed by the attorneys general of all 50 states, Intuit will suspend TurboTax's "free, free, free" ad campaign, which Cameron said "lured customers with promises of free tax preparation services, only to deceive them into paying for services."
That means those who used the tax-filing program's free edition for tax years 2016-18 will get $30 for each year they were told that they had to pay to file and were charged when the services should have been free under the IRS Free File program, Cameron said, adding that eligible tax filers can expect to get notices and a check by mail.
"Intuit's deceptive business practices led Kentucky consumers to pay for tax services that they were eligible to receive for free," Cameron said. "This settlement recovers more than $1.6 million for Kentuckians and requires the company to stop misrepresenting its online tax preparation products."
Intuit will also pay restitution to nearly 4.4 million taxpayers, enhance disclosures in its advertising and marketing of free products and design products to better inform filers whether they will be eligible to file their taxes for free. Additionally, the company cannot require customers to start their filing over if they exit one of the paid products to use a free one instead.
Copyright 2022 WDRB Media. All Rights Reserved. The Associated Press also contributed to this report.
