A year ago, all 50 states and the District of Columbia announced a $141 million settlement with Intuit, the creator of TurboTax. The investigation, led by New York Attorney General Letitia James, focused on how the company tricked customers into paying for tax preparation, even though they qualified for a program free government. The Attorney General said that the probe has been triggered by Reporting by ProPublica in 2019.
About 4.4 million low-income Americans will receive payments under the deal. On Thursday, James announced that the process of sending checks to all those people would begin next week.
“TurboTax’s predatory and deceptive marketing has deceived millions of low-income Americans trying to meet their legal obligations to file their taxes,” she said. “Today we are righting that wrong and putting money back in the pockets of hard-working taxpayers who should never have paid to file their taxes.”
Payments range from $29 to $85, depending on the number of years each eligible consumer has used TurboTax. (A number of people quoted in ProPublica articles said they had paid more than $100 for what they thought were free services.) The agreement covered from 2016 to 2018. Those eligible for payments will be contacted by email and will not need to file a claim.
Intuitive did not admit wrongdoing in the regulations.
As ProPublica documented In history After historyTurboTax has for years lured consumers with the promise of a “free” tax return, then rolled out a series of tricks and traps to steer them towards paid products.
Meanwhile, Intuit lobbied for decades to stop the government from developing a free tax filing system. One result of this struggle 20 years ago was the IRS Free File program: in exchange for the IRS agreeing not to develop a free filing system, the preparation industry statements agreed to offer something similar. On paper, the program allowed 70% of taxpayers to file for free. But only a tiny percentage of people have ever used Free File – in part because Intuit, H&R Block and others have actively sought to keep taxpayers from finding out while offering their own “free” products.
After the ProPublica articles in 2019, the situation changed. The IRS and tax preparation companies dropped the provision that prevented the IRS from creating its own free filing system. H&R Block and TurboTax abandoned the Free File program. And the IRS is actively exploring how a public free filing program might work.
In addition to the investigation by state attorneys general, the Federal Trade Commission also sued Intuit, claiming the company misled consumers with its “gratuitous” marketing. Intuit defended the accuracy of its ads, but said it voluntarily stopped running its “free, free, free” TV ads in a “spirit of cooperation.” That case is in progress.