According to an announcement on Wednesday, Intuit, the owner of TurboTax, has agreed to pay $141 million in restitution to 4.4 million low-income customers who had been charged for using the TurboTax Free Addition.
These customers should have gotten the tax filing services for free. All 50 states and the District of Columbia are party to the agreement and have signed it.
The company also agreed to reform its business practices including suspending a “free, free, free” advertising campaign that “lured” customers with the promise of free tax preparation but then asked them to pay, according to an announcement from New York Attorney General Letitia James.
Intuit admitted no wrongdoing as part of the agreement and expects minimal impact to its business from implementing changes, according to a company statement.
“Intuit is clear and fair with its customers, including with the nearly 100 million Americans who filed their taxes free of charge with our products over the last 8 years — more than all other tax prep software companies combined,” stated Kerry McLean, Intuit’s executive vice president and general counsel.
Consumers are expected to receive about $30 for each year they paid for services, the announcement said. They will automatically receive notices and a check by mail.
“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” James said. “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.”
Intuit had previously offered two free versions of TurboTax. One was through the IRS Free File Program, a public-private partnership that lets low-income Americans file their taxes for free. Intuit ended its participation in July 2021.
Intuit had another version, the TurboTax Free Edition. It was marketed as “free” but it’s only free for taxpayers with “simple” returns as defined by Intuit, according to the announcement.
The Federal Trade Commission filed a lawsuit with similar allegations as the states in March. That case is ongoing.
“We believe this settlement with the state attorneys general and the District of Columbia also addresses the issues at the core of the FTC litigation, making that lawsuit entirely unnecessary,” Intuit’s McLean said.
“Nevertheless, we are fully prepared to litigate with the FTC to prove the merits of our case.”
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.