TurboTax to pay $141m to settle claims it scammed millions of people

Might be a $30 check for you if you were screwed over by 'free, free, free' ads

Intuit will cough up $141 million in settlement costs and has promised to not make any misleading claims about its supposedly free tax-filing software, prosecutors in the US announced on Wednesday.

Attorneys General Letitia James in New York and Herbert Slatery III 1in Tennessee led efforts to sue Intuit for allegedly scamming taxpayers with false advertising. All 50 US states plus the District of Columbia joined the lawsuit, and accused the tech giant of luring people into using its TurboTax software on the false pretense it would be free.

This legal action followed a probe by ProPublica in Intuit's allegedly unfair trade practices.

TurboTax is used by tens of millions of US citizens and residents to file their annual tax returns. The tool helps people fill out government forms and submit the documents electronically, and automatically estimates any refunds or rebates they are entitled to receive. The TurboTax Free Edition promises taxpayers with simple tax returns they can use this version of the software at no cost. 

But after millions of users filled out their tax forms using TurboTax Free Edition, they were told by Intuit they needed to pay after all, using the Premium or Deluxe versions of the application suite, if they wanted to submit their claims. Intuit does not make it clear that only a small percentage of users are actually qualified to use the service for free, it was claimed.

Intuit misled the most vulnerable among us to make a profit

Attorney General James said Intuit cheated millions of low-income workers, who should have been able to file their taxes for free. 

"For years, Intuit misled the most vulnerable among us to make a profit. 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. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal," she said in a canned statement.

Intuit (annual net income: $2bn) has agreed to pay $141 million (seven percent of annual net income) to compensate folks to settle the lawsuit. They will receive a payment of about $30 for each year they paid for Intuit's supposedly free filing services. Under the agreement, the biz will suspend its "free, free, free" advertising campaign promoting TurboTax Free Edition.

Intuit also promised it would add design features that will inform users whether they're truly eligible for free tax filing, and will save their tax information if they close a paid online application to start a free form instead. 

Kerry McLean, the company's executive vice president and general counsel, said in a canned statement: "Intuit is pleased to have reached a resolution with the state attorneys general that will ensure the company can return our focus to providing vital services to American taxpayers today and in the future.

"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 eight years — more than all other tax prep software companies combined. In coming to a resolution on this matter, we admitted no wrongdoing and are pleased to be able to continue our strong partnership with governments to best serve the needs of taxpayers across the country."

The company is also embroiled in a legal spat with America's Federal Trade Commission, which filed a lawsuit accusing Intuit of "unlawful acts and practices over a period of many years," including deceptive advertising and marketing of TurboTax. The FTC similarly asked judges for a temporary restraining order and to grant a preliminary injunction to block the company broadcasting any adverts claiming TurboTax is free to use.

"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. Nevertheless, we are fully prepared to litigate with the FTC to prove the merits of our case," Intuit's McLean added.

As a previous report by ProPublica pointed out, Intuit spends significant dollars in lobbying to keep the tax system in the US complicated. ®

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