Indianapolis News and HeadlinesWRTV Investigates

Actions

Feds file suit against TurboTax over "free" tax filing software

Complaint alleges deceptive advertising
TurboTax
Tax Season Begins
Posted at 11:40 AM, Mar 30, 2022
and last updated 2022-03-30 12:29:29-04

INDIANAPOLIS — The Federal Trade Commission has filed a complaint against the maker of TurboTax, a popular tax filing software, alleging the company deceived consumers with bogus advertisements pitching “free” tax filing that millions of consumers could not use.

The commission filed a lawsuit in federal court Monday asking the judge to halt Intuit’s “deceptive advertising” immediately.

The ads in question have run during major events, including the Super Bowl, and have also aired during this year’s NCAA Basketball Tournament:

As WRTV Investigates reported in January, TurboTax opted out of the IRS Free File program, a public-private program that lets you prepare and file your federal income tax online using guided tax preparation or you can file at an IRS partner site.

The FTC alleges that the company’s advertisements touting their supposedly “free” products mislead consumers into believing that they can file their taxes for free with TurboTax.

Most tax filers can’t use the company’s “free” service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income,” the FTC said.

The commission alleges, inn 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.

“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, Director of the Bureau of Consumer Protection. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”

For example, in at least one ad a disclaimer appeared on the screen while an announcer said “That’s right, TurboTax Free is free. Free, free free free.”

Earlier this year, Intuit told WRTV that its $0 Any Way program would allow 60 million people with simple federal and state taxes to file for free.

“Only TurboTax gives taxpayers with a simple return the choice to do their taxes themselves, get help from a tax expert along the way, or hand it off to a dedicated tax expert to do their taxes for them, for $0,” the company said in a statement to WRTV in January. “TurboTax will be offering those filing simple tax returns for its TurboTax Live Basic and TurboTax Live Full Service Basic products for free, in addition to its TurboTax Free Edition product, which is America’s most widely used product for filing taxes free of charge. $0 for federal returns. $0 for state returns. $0 any way taxpayers want to file.”

The company provided the following response on Monday:

"Intuit Inc. (Nasdaq: INTU), the global technology platform that makes TurboTax, QuickBooks, Mint, Credit Karma and Mailchimp, announced that it will vigorously challenge a complaint filed today in the U.S. District Court in the Northern District of California by the U.S. Federal Trade Commission (FTC).

In its filing, the FTC inaccurately alleges Intuit’s advertising practices directed consumers who were eligible for free tax filing software from TurboTax or the IRS Free File Program to the company’s paid tax preparation products. The facts say otherwise.

“The FTC’s arguments are simply not credible. Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep,” said Kerry McLean, executive vice president and general counsel of Intuit. “Over the past eight years, TurboTax products have helped nearly 100 million Americans file their taxes for free, and our most recent free advertising campaign has only accelerated the use of TurboTax free offerings, driving approximately 60% growth from 11 million free filers in 2018 before the campaign launched to more than 17 million free filers in 2021.”

In fact, Intuit has always supported consumers filing for free as a founding member of the IRS Free File program and in our other practices. The FTC’s complaint fails to acknowledge the reality that Intuit was, at all times, in compliance with the IRS requirements.

“The fact that Intuit complied with the rules and regulations of one government agency, but is now being targeted by another, demonstrates a significant disconnect. With the FTC’s action, companies will be much less willing to enter into public-private partnerships with the government that benefit consumers,” said McLean.

Intuit continually sought and continues to seek ways to increase the number of taxpayers that file using its free tax preparation products. Last tax season alone, Intuit delivered 17 million free tax filings, the most in the industry. Intuit helped the IRS Free File organization far exceed its stated goals of making free tax preparation available to 70% of filers. Today, free tax preparation is currently available to 100% of American taxpayers. That program, created and governed by the IRS, established marketing requirements for all participants. As a longtime advocate for tax simplification and taxpayer access to free tax preparation, the facts of the case do not support the FTC’s claims.

“While it is disappointing that the FTC chose to file this lawsuit, we look forward to presenting the facts in court and are confident in the merits of our position,” said McLean.

In its decision to file a claim against Intuit, the FTC commissioners were not unanimous."

If your adjusted gross income was $73,000 or less, you can use the IRS Free File program which launched Jan. 14.

Several companies offer IRS Free File, but TurboTax and H&R Block no longer participate.

If you have tax related concerns, please contact WRTV Investigates Kara Kenney at kara.kenney@wrtv.com.

Click here for more info!

Contact WRTV Investigates