The Wisconsin Department of Justice has secured $2,370,000 from the owner of TurboTax, Intuit Inc., for deceiving consumers into paying for tax services that should have been free.
The announcement came Thursday as a result of a multistate effort, led by New York and Tennessee. Intuit will pay restitution to millions of consumers across the nation who were unfairly charged. An investigation began after ProPublica reported that the company was using deceptive digital tactics to steer low-income consumers toward its commercial products and away from federally supported free tax services with their “free, free, free” ad campaigns.
The investigation found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program. According to the investigation, the company used similar names for both its IRS Free File product and its commercial “freemium” product. Intuit also bid on paid search advertisements to direct consumers who were looking for the IRS Free File product to the TurboTax “freemium” product instead. Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free. Its website included a “Products and Pricing” page that stated it would “recommend the right tax solution,” but never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.
“More than 76,000 Wisconsinites ended up paying for tax preparation products that were marketed as being ‘free,’” said Attorney General Josh Kaul in a statement. “It’s not right for a corporation to use deceptive tactics to profit from folks who are paying their taxes.”
Intuit will pay $141 million in restitution, of which roughly $2.5 million will be used for administrative fund costs. The company must also suspend its “free, free, free” ad campaign. Consumers who used TurboTax’s Free Edition for tax years 2016 to 2018 are expected to receive a direct payment of about $30 for each year that they were deceived into paying for filing services. Impacted consumers will automatically receive notices and a check by mail. Wisconsin will receive more than $2,370,000.
All 50 states and the District of Columbia have signed onto the agreement.
According to the final agreement, Intuit will reform its business practices, including: refraining from making misrepresentations in connection with promoting or offering any online tax preparation products; enhancing disclosures in its advertising and marketing of free products; designing its products to better inform users whether they will be eligible to file their taxes for free; and refraining from requiring consumers to start their tax filing over if they exit one of Intuit’s paid products to use a free product instead.
Intuit withdrew from the IRS Free File program in July 2021.