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Intuit, the owner of popular TurboTax tax filing software, will pay $ 141 million in restitution to millions of low-income Americans who have been “unfairly charged” for services that were supposed to be free under an intergovernmental agreement announced in an intergovernmental agreement. .
TurboTax has also agreed to reform its business practices. For example, he has to suspend an “free, free, free” advertising campaign that “enticed” customers with a promise of free tax preparation, but then asked them to pay, according to a statement from New York Attorney General Leticia James.
The agreement was signed by all 50 states and the District of Columbia.
Intuit has not acknowledged any breach of the agreement and expects minimal impact on its business from the changes, the company said in a statement.
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“Intuit is clear and honest with its customers, including the nearly 100 million Americans who have taxed our products for free over the past 8 years – more than any other tax preparation company combined,” said Carrie McLean, chief executive. Intuit. vice president and general adviser.
Intuit will pay restitution to nearly 4.4 million consumers who used the Free Edition of TurboTax during the tax years 2016-2018. These customers were told that they had to pay for the service even though they were eligible to apply for free through the IRS free filing program offered through TurboTax, according to the ad.
Consumers are expected to receive about $ 30 for each year they pay for services, the announcement said. They will automatically receive messages and a check in the mail.
“Intuit has deceived millions of low-income Americans into the free tax filing services they were entitled to,” James said in a statement. “For years, Intuit has misled the most vulnerable among us to make a profit. Today, every state in the country is responsible for Intuit for the fraud of millions of taxpayers, and we are returning millions of dollars into the pockets of affected Americans.”
Charges and reforms
Until recently, Intuit offered two free versions of TurboTax. One was through the IRS Free File program, a public-private partnership that allows low-income Americans to file taxes for free. Intuit ceased its involvement in July 2021. (This version of TurboTax was available to taxpayers with incomes below $ 39,000 and servicemen with incomes below $ 72,000 in the 2020 tax year.)
Intuit has aggressively offered another version, TurboTax Free Edition, as “free,” but it is free only to taxpayers with “simple” returns, as defined by Intuit, according to the announcement. Users without a simple return must switch to the paid version of the tax service; however, these individuals may be eligible for the IRS Free File program.
(For the 2021 tax year, Intuit calls a simple return that can be filed on Form 1040 with limited attached schedules, such as one that includes interest paid on a student loan, according to the Federal Trade Commission.)
The service will be free for about one-third of U.S. taxpayers, while IRS Free File products are about 70% free, the announcement said.
We believe that this agreement with the Attorney General and the District of Columbia also addresses the issues underlying the FTC lawsuit.
executive vice president and chief legal counsel of Intuit
State attorneys general allege that Intuit violated state laws on consumer protection by engaging in fraudulent and unfair marketing, advertising and selling taxes online, according to the agreement.
For example, in the 2018 tax year, Intuit hid from search engines the landing page of its IRS Free File program for about five months at the peak of the tax season.
In addition, the company’s TurboTax homepage misled consumers into thinking they were eligible for the freemium service, and its product and price screen did not mention the Free File product, which “prevents consumers from learning about its existence,” it said.
Last tax season, Intuit delivered more than 17 million free tax returns, the most in the industry and several times more than the IRS Free File program, the company said in a statement. He expects to help more than 40 million taxpayers prepare and file their tax returns for free over the next three years.
TurboTax has agreed to change some business practices, including: better informing users whether they will be eligible to file taxes for free, and refrain from requiring consumers to restart tax tax documentation when they switch from a paid product to a free one. Java.
In March, the Federal Trade Commission filed a lawsuit with similar charges as the states. This case is ongoing.
“We believe that this agreement with the Attorney General and the District of Columbia also solves the problems that underlie the FTC lawsuit, making this lawsuit completely unnecessary,” said McLean of Intuit. “However, we are fully prepared for a lawsuit with the FTC to prove the merits of our case.”
An FTC spokesman declined to comment on the statements.