This year, some people will be getting what I guess you could call a ‘bonus tax refund’ from Intuit, the company that runs TurboTax.
That’s because after years of misleading consumers via deceptive advertising tactics, search engine manipulation, and hidden fees built into Intuit’s TurboTax filing software, the company has to pay out $141 million thanks to a lawsuit led by New York’s Attorney General, Letitia James. The money will be distributed among 4.4 million customers who filed with TurboTax between 2016 and 2018, and were wrongly charged for services advertised as “free.” If you are among those included in the suit, you’ll automatically receive a check for about $30 for each of the covered years you shelled out for the TurboTax paid version.
“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,” AG James said in a Wednesday statement.
All 50 states and Washington D.C. also signed onto the lawsuit, which was inspired by a fantastic series of ProPublica reports, according to James’ statement. “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,” said the AG.
Texans make up the largest chunk of people being reimbursed through the settlement, with more than 10% of the qualified consumers (or nearly half a million people) having filed in the state, according to Appendix C of the lawsuit agreement.
For years, TurboTax ran two filing services, one in partnership with the IRS Free File program that was actually free for some low-income people and members of the military, and another called “TurboTax Free Edition,” that aggressively directed users to paid versions of the software and only remained free for those with “simple returns.”
That “Free” edition was heavily advertised via paid Google adds, while the truly free version was intentionally hidden from search results. In 2020 the IRS told TurboTax and its fintech peers that they needed to stop obscuring their approved Free File programs, and start being transparent about how users could access them. Then, in July 2021, Intuit left the IRS Free File partnership to “focus on further innovating in ways not allowable under the current Free File guidelines,” according to a statement by the company.
In a new company statement regarding the multi-million dollar settlement, Intuit stood by its claim that it did nothing wrong, and said it won’t be hurt by the mandated payout. “As part of the agreement, Intuit admitted no wrongdoing, agreed to pay $141 million to put this matter behind it, and made certain commitments regarding its advertising practices. Intuit already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward,” the company wrote. As a bonus: the statement also includes a quote from an Intuit vice president, Kerry McLean describing the lawsuit as “entirely unnecessary.”
The federal government doesn’t offer its own free tax filing program because of a 20-year-old anti-compete agreement with tax filing companies, but all this goes to further show that taxpayers would probably be much better off it did. For now though, we’re still stuck navigating the good old fashioned web of deceit.