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FTC sues TurboTax maker over 'free' filing software

TurboTax
Posted at 9:54 AM, Mar 30, 2022
and last updated 2022-03-30 12:54:19-04

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 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, in 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.”

On Monday, Intuit said in a statement that they would "vigorously challenge" the lawsuit.

“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.

McLean said that 17 million Americans filed taxes for free last tax season using TurboTax and over the previous eight years, 100 million Americans have filed taxes for free using the software.

“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."

On Tuesday, Intuit said in a filing that it had already removed ads that the FTC says were deceptive after meeting with FTC Chair Lina Khan, the Associated Press reported.

According to the AP, up until 2021, Intuit offered a free version of TurboTax through the IRS’ Free File Program for low-income filers.

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

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

Kara Kenney at WRTV first reported this story.