TurboTax to pay customers $141 million for 'deceptive business practices'

Intuit, the parent company of the tax filing software TurboTax, will pay customers $141 million for allegedly leading low-income Americans to pay for services when they shouldn’t have had to.

The settlement was announced on Wednesday by New York Attorney General Letitia James. According to the judge, around 4.4 million customers were “unfairly charged” for filing their taxes. Furthermore, Inuit has to suspend its “free, free, free” campaign since it allegedly gives false promises of a free service.  

TurboTax had two free versions of the tax filing software until last year. The first version was through the Internal Revenue Service’s Free File Program, aimed at taxpayers earning around $34,000 and military members. The second version, “TurboTax Free Edition,” is meant only for taxpayers with “simple returns.”

James said the investigation into Intuit came after a 2019 report accused the tax company of leading clients eligible for federally supported tax filing products away from that software. According to the report, Intuit made the federally supported systems hard to find on the web and directed them towards TurboTax’s paid services. Additionally, Intuit aggressively marketed the product as a free service. Yet in reality, only about a third of U.S. taxpayers were eligible for the “free services.”

"Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to," James wrote in a press release. "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."

"As part of the agreement, Intuit admitted no wrongdoing, agreed to pay $141 million to put this matter behind it, and made certain commitments regarding its advertising practices," representatives for Intuit said on Wednesday. "Intuit already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward."

As a result of the settlement, customers who used TurboTax’s Free Edition from 2016 to 2018 will receive $30 for every year they were charged for the service.