HARTFORD, Conn. (WFSB) – Connecticut will receive $1.2 million in restitution from Intuit Corporation for misleading TurboTax customers.
Connecticut Attorney General William Tong said Wednesday that 40,841 Connecticut consumers were deceived into paying for tax services advertised as free.
Following a multi-state agreement, Intuit will pay $141 million in compensation to millions of consumers across the country. In addition, Tong said Intuit should suspend TurboTax’s “free, free, free” ad campaign that lured customers with promises of free tax preparation services, only to get them to pay for the services.
All 50 states and the District of Columbia have signed the agreement.
“TurboTax marketed its services as ‘free, free, free’, but what they really meant was ‘fee, fee, fee.’ Over 40,000 Connecticut consumers have been tricked into paying for these services. Our agreement requires TurboTax to refund $141 million in refunds nationwide, including $1.2 million to Connecticut consumers. Affected consumers will automatically receive a notice and check out in the mail for $29.64,” Tong said.
An investigation into Intuit began after ProPublica reported that the company was using deceptive digital tactics to steer low-income consumers toward its commercial products and away from free federally-backed tax services.
Intuit offered two free versions of TurboTax. One was his participation in the IRS Free File program, a public-private partnership with the Internal Revenue Service that allows taxpayers earning around $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax preparation companies by providing its own electronic tax preparation and filing services to US taxpayers.
Intuit also offered a commercial product called “TurboTax Free Edition”, which was only free to taxpayers with “simple returns” as defined by Intuit. Over the past few years, Tong said, TurboTax has aggressively marketed this “freemium” product, including through ad campaigns where “free” was the main or sometimes the only selling point. However, the TurboTax “freemium” product was only free to about one-third of US taxpayers. In contrast, the TurboTax Free File product was free for 70% of taxpayers.
Tong said the multistate investigation found Intuit engaged in several deceptive and unfair business practices that limited consumer participation in the IRS Free File program. The company has used confusingly similar names for its IRS Free File product and its commercial “freemium” product. Intuit bid on paid search ads to direct consumers searching for the IRS Free File product to the “freemium” TurboTax product. Intuit also deliberately blocked its IRS Free File homepage from search engine results during the 2019 tax filing season, preventing eligible taxpayers from filing their taxes for free. Additionally, 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 weren’t. not eligible for the “freemium” product.
Intuit will pay $141 million in restitution, of which about $2.5 million will be used for administrative costs, Tong said.
The Attorney General also said that under the agreement, Intuit will provide restitution to millions of consumers who started using the free edition of TurboTax for the 2016 to 2018 tax years and were told that they had to pay to file even though they were eligible to file for free using the version of TurboTax offered under the IRS Free File program. Consumers are expected to receive a direct payment of approximately $30 for each year they were tricked into paying for deposit services. Affected consumers will automatically receive notices and a check in the mail.
Intuit also agreed to reform its business practices, including:
- Refrain from making false statements in promoting or offering online tax preparation products;
- Improve disclosures in its advertising and marketing of free products;
- Design its products to better inform users whether they will be able to declare their taxes for free; and
- Refrain from requiring consumers to start their tax filing over again if they switch from one of Intuit’s paid products to use a free product instead.
Intuit withdrew from the IRS Free File program in July 2021.
New York and Tennessee led the multistate investigation with support from attorneys general from Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Texas and Washington. All 50 states and the District of Columbia have signed on to this agreement. The States would like to thank the Federal Trade Commission for its assistance in the investigation.
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