TurboTax scheme stopped; $3.5 million going back to Virginia consumers
(The Center Square) – Intuit, owner of the popular tax-filing website TurboTax, will need to pay out $3.5 million to Virginia consumers in response to allegations of deceptive advertising practices, according to a settlement agreement between the company and the commonwealth.
According to Attorney General Jason Miyares’ office, TurboTax advertised that its services were free to lure customers in and then charged them for the services. Virginia, along with the 49 other states and the District of Columbia, launched an investigation into their practices after a ProPublica report alleged that the company used deceptive tactics to steer low-income consumers toward TurboTax and away from federally supported free tax services.
“TurboTax took advantage of and deceived Virginians,” Miyares said in a statement. “I’m proud of the role my office played to secure substantial relief for the Virginia consumers that TurboTax misled. My office will continue to aggressively go after bad actors that hurt Virginia consumers, because they must be held accountable.”
TurboTax’s parent company, Intuit, was forced to pay restitution to customers in every state, which amounted to $141 million. About $2.5 million will be used for administrative fund costs. Millions of consumers nationally will receive about $30 for every year they were deceived into paying for the services, which spanned the years 2016 through 2018. They will receive a check by mail.
According to the attorney general’s office, TurboTax participated in the IRS Free File program, which allowed taxpayers who earned $34,000 or less to file their taxes for free. As part of this agreement with TurboTax and other companies, the IRS agreed not to create its own electronic tax preparation and filing services.
However, the company recommended that consumers use its “freemium” product, rather than the IRS Free File Product; the “freemium product only provided free services to about one-third of taxpayers, while the IRS Free File products were free to about 70% of taxpayers,” the attorney general’s release said.
“The company used confusingly similar names for both its IRS Free File product and its commercial ‘freemium’ product,” the attorney general’s office noted. “Intuit 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. Moreover, TurboTax’s 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.”
Per the settlement agreement, Intuit will be forced to reform its business practices. The company will need to refrain from misrepresentations, disclose its marketing of free products, inform users when they can receive free services and not force consumers to restart their tax filings if they exit a paid product and begin using a free product.
The company withdrew from the IRS Free File program in 2021.
Disclaimer: This content is distributed by The Center Square
