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FTC accuses TurboTax maker Intuit of misleading consumers

The US government is suing Intuit, alleging that the owner of widely used tax-filing software TurboTax is lying to customers by claiming the product is free and then directing them to paid services and products.

The Federal Trade Commission filed a complaint Monday in the Northern District of California and asked a court for an emergency motion to stop the TurboTax ads.

“TurboTax bombards consumers with ads for ‘free’ tax filing services, then hits them with fees when it’s time to file,” Samuel Levine, director of the FTC’s Consumer Protection Bureau, said in a statement. a statement. declaration. “We’re asking a court to immediately stop this bait and change and protect taxpayers at the height of filing season.”

In a court filing, the FTC said ads for TurboTax “should be suspended to avoid victimizing consumers” and alleges the company’s marketing violates federal misleading and deceptive advertising laws.

Intuit denied misleading customers, saying in a Blog post that he has always followed IRS rules for free deposit programs, calling the FTC’s claims “just not credible.”

TurboTax is America’s most widely used tax software, used by two-thirds of all tax filers, according to a estimate. Many of its advertisements tout its free option. In a recent square, a dance teacher leads an exercise class with the words: “and free, and free, and freeeeeeee.” In another, a fast-talking auctioneer runs a cattle auction in which all bids are “free.”

During the past tax season, the company ran ads promoting TurboTax’s free service at least 11,000 times on nearly 500 television stations, the FTC said in court filings. But filing your taxes for free using the software is nearly impossible, says the FTC. TurboTax only makes free filing available to people with “simple” tax returns, a definition that regulators say the company changes regularly and which effectively excludes two-thirds of taxpayers, according to the agency.

TurboTax Free Edition 2022 Commercial “Dance Workout” (Official Announcement: 30) by
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“In truth, TurboTax is only free for certain users, depending on which tax forms they need,” the FTC said in court documents. “For many others, Intuit tells them, after investing time and effort collecting and entering their sensitive personal and financial information into TurboTax to prepare their tax returns, that they cannot continue for free; they will have to switch to a paid TurboTax service to complete and file their taxes.”

As examples of what it calls deceptive marketing, the FTC noted that TurboTax uses a questionnaire on its site to funnel many users into paid software upgrades in order to file their taxes.

Until 2021, TurboTax offered a completely free option through the Free File program, which it operated in partnership with the IRS. But the software maker continued to direct eligible Free File taxpayers to paid upgrades, the FTC said. Between November 2018 and April 2019, Intuit also used code to hide its Free File software from search engines, according to the government.

As a result, people looking for free tax filing information would have been directed to the “freemium” version of TurboTax. (TurboTax stopped offering a free file option in 2021.)

Intuit pushed back against the FTC’s lawsuit on Monday, saying it would “vigorously contest” the lawsuit.

“Far from driving taxpayers away from free tax preparation offers, our free advertising campaigns have led more Americans to file their taxes for free than ever before and have played a pivotal role in raising awareness of free tax preparation. tax preparation,” said Kerry McLean, Intuit’s general counsel. in a corporate position.

McLean said 17 million Americans filed for free in 2021 through TurboTax, more than any other tax software provider, and more than 100 million people have used it over the past eight years.

“As a longtime advocate of tax simplification and taxpayer access to free tax preparation, the facts of the case do not support the FTC’s assertions,” he said.

Intuit also said in court deposits that it remove its “free, free, free” ads from airing for the remainder of tax season. No ads would run after Friday, the company said.

Jill Schlesinger explains why you should file your taxes ASAP


This isn’t the first time Intuit has been sued. After an investigation by the non-profit investigative media outlet ProPublica, the city of Los Angeles and Santa Clara County sued the software company in 2019, accusing it of defrauding customers. Consumers have also sued the company in class action lawsuits and private arbitration.

The Free File program was conceived in the early 2000s as a public-private partnership that would allow Americans earning less than $73,000 a year to file tax returns at no cost.

However, the program is far from achieving its objectives. Only 3% of taxpayers eligible for free filing actually did so in 2019, Treasury report finds found, while many others who could have filed for free paid for the privilege. The two most popular tax software providers, including TurboTax and H&R Block, have both left the program in recent years.