Nationwide settlement over misleading TurboTax ads includes $11.4 million in payouts for Californians

It turns out the Intuit’s TurboTax services weren’t so “free, free, free”

As part of a $141 million nationwide settlement announced Wednesday with Intuit, the financial software company behind TurboTax, roughly 370,000 Californians will receive $11.4 million in direct payments.

The agreement, which included 51 attorneys general among others, resolves allegations that TurboTax’s ads for free tax filing services misled consumers and steered low-income taxpayers away from the Internal Revenue Services’ (IRS) Free File Program for which they qualified.

In fact, a 2020 audit by the Treasury Inspector General for Tax Administration found that more than 14 million taxpayers paid for tax filing services they could have accessed for free.

According to a report from the US Government Accountability Office published last week, while 70 percent of taxpayers are eligible for the IRS Free File Program, less than 3 percent use it.

While this is in part attributed to poor outreach and structure on the government’s part, investigations by ProPublica and officials found Intuit to have knowingly played a role in sowing confusion and guiding taxpayers towards its products instead — products that even when advertised as free often require surprise fees or upgrades to file in the end.

This is especially notable given that the Free File Program, a public-private partnership, was born out of a compromise wherein tax prep companies, including Intuit, agreed to provide free tax filing options for low-income taxpayers in exchange for the government staying out of the tax prep and e-filing market.

(Intuit announced its departure from the program last year.)

“Every year, millions of hardworking Californians put their trust in online tax filing services like TurboTax, following their step-by-step guides that promise to find taxpayers the best deals for little-to-no cost,” Attorney General Rob Bonta said in a statement, which noted TurboTax’s 40 million users make it the largest e-file tax service.

“Our investigation found that Intuit repeatedly and deliberately broke that promise. For more than a decade, Intuit used underhanded tricks and deceptive tactics to steer low-income and military taxpayers into paid products despite knowing that they qualified for free help."

Intuit admitted no wrongdoing in the settlement, per a post on its blog. The Mountain View company has faced a number of consumer arbitration claims and was also recently sued for deceptive marketing in its ads by the FTC.

Users who paid for tax services that should have been free between 2016 and 2018 will receive about $30 per relevant year. Covered consumers will automatically be notified and sent checks by mail.

The settlement also requires Intuit to emphasize limitations to TurboTax’s “free” services in advertising going forward, among other changes to its processes.

“In Your Corner” is a new column that puts watchdog reporting to work for the community. If you have a concern, a tip, or a hunch, you can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or marisa.endicott@pressdemocrat.com. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.