A record multistate agreement led by New York Attorney General Letitia James has been reached with the tax software (opens in new tab) company Intuit which makes TurboTax (opens in new tab).
Under the terms of the agreement that Attorney General James made with officials from all 50 US states and Washington DC, Intuit has agreed to pay out $141m to millions of low-income taxpayers who believed the company’s TurboTax “Free Edition” was actually free.
Taxpayers who were tricked into paying for the free edition of TurboTax between 2016 and 2018 will receive $30 for every year they used the software. Fortunately, impacted customers don’t have to take any action on their end and they will be automatically notified and receive checks from the company by mail
In a press release (opens in new tab), Attorney General James provided further insight on the matter and explained how the agreement will put companies on notice regarding deceptive marketing, saying:
“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to. For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal. New Yorkers can count on my office to protect their wallets from white-collar scammers.”
According to The Verge (opens in new tab), there are actually two versions of Intuit’s TurboTax software with the word “free” in their name: TurboTax Free Edition and TurboTax Free File.
Despite the fact that the company marketed the Free Edition of its tax software as being completely free, close to 4.4m taxpayers actually ended up owing the company money after using it.
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Instead of TurboTax Free Edition, these taxpayers should have actually been using TurboTax Free File which up until recently, was part of the IRS’ Free File program that saw the US government work together with tax preparation companies to provide US citizens with a free way to file their taxes. However, Intuit dropped out of the IRS Free File Program (opens in new tab) in 2021 as the program’s limitations held it back from innovating.
In addition to handing over $141m, Intuit has said that it will stop misrepresenting its online tax preparation products, improve the disclosures found in its ads and marketing materials for its free products, make it clearer in its software if users are eligible for free filing and make it so that customers don’t have to start from the beginning if they switch from a paid tax product to a free one.
- Get a handle on both your state and federal taxes with the best tax software (opens in new tab)
Via The Verge (opens in new tab)