Over 66K Marylanders Eligible For Refunds In $141M Settlement Over 'Free' TurboTax Ads
BALTIMORE (AP/WJZ) — The company behind the TurboTax tax-filing program will pay $141 million to customers across the United States who were deceived by misleading promises of free tax-filing services.
In Maryland, more than 66,000 consumers are eligible for part of the $2 million in restitution the state will receive, Maryland Attorney General Brian Frosh said.
Under the terms of a settlement signed by the attorneys general of all 50 states, Mountain View, California-based Intuit Inc. will suspend TurboTax's "free, free, free" ad campaign and pay restitution to nearly 4.4 million taxpayers, Frosh said.
The investigation into Intuit was sparked by a 2019 ProPublica report that found the company was using deceptive tactics to steer low-income tax filers away from the federally supported free services for which they qualified — and toward its own commercial products, instead.
"TurboTax lured potential customers with promises of free tax filing services, when it knew most of those customers would not qualify for those services," Frosh said in a statement. "Once those customers were hooked, TurboTax and its parent company, Intuit, converted those customers to another service for a fee. We are pleased that those customers who paid for services that they should have received for free will receive restitution as part of our settlement."
"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 in a blog post Wednesday. "Intuit already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward."
Until last year, Intuit offered two free versions of TurboTax. One was through its participation in the Internal Revenue Service's Free File Program, geared toward taxpayers earning roughly $34,000 and members of the military. Intuit withdrew from the program in July 2021, saying in a blog post that the company could provide more benefits without the program's limitations.
The company also offers a commercial product called "TurboTax Free Edition" that is only for taxpayers with "simple returns," as defined by Intuit.
According to documents obtained by ProPublica, Intuit executives knew they were deceiving customers by advertising free services that were not in fact free to everyone.
"The website lists Free, Free, Free and the customers are assuming their return will be free," an internal company PowerPoint presentation said. "Customers are getting upset."
Under the agreement, Intuit will provide restitution to consumers who started using the commercial TurboTax Free Edition for tax years 2016 through 2018 and were told that they had to pay to file even though they were eligible for the version of TurboTax offered as part of the IRS Free File program.
Consumers owed refunds will automatically receive notices and checks by mail.
"We empower our customers to take control of their financial lives, which includes being in charge of their own tax preparation," an Intuit spokesperson told ProPublica in a statement in 2019.
The spokesperson added that a "government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor and enforcer) the tax preparer is fraught with conflicts of interest."
The Associated Press contributed to this report
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