An Intuit office in San Diego. REUTERS/Mike Blake
Intuit agreed Wednesday to pay $141 million in restitution to settle claims by all 50 U.S. states and the District of Columbia that it tricked millions of customers into buying online TurboTax products that the company deceptively advertised as “free.”
Documents in Intuit settlement with states (PDF)
Wednesday’s settlement resolves claims that Intuit steered at least 4.4 million customers, many with low incomes, into buying its tax preparation products despite their being eligible for free electronic filing through the Internal Revenue Service.
The settlement also calls for the largest U.S. online tax preparer, whose operations are based on San Diego, to suspend ads containing slogans such as “TurboTax Free is free. Free free free free.”
“Californians who used TurboTax’s Free Edition for tax years 2016 through 2018 and who were told they had to pay to file, even though they were eligible to file for free through the IRS Free File Program, will be eligible for restitution,” the state Attorney General’s Office said Thursday. “Eligible Californians will automatically receive notices and checks by mail of around $30 for each year they were deceived.”
Of the 4.4 million “Covered Consumers,” 371,403 are Californians.
Intuit offers two free versions of TurboTax: an IRS Free File version meant for lower-income people and military personnel, and a commercial product called TurboTax Free Edition for people with “simple” returns.
The states said that beginning in 2016, Intuit steered customers eligible for IRS Free File into using TurboTax Free Edition, only to later tell them they needed to pay $59.99 or more to file because their returns were not simple.
Intuit withdrew from the IRS Free File program last July.
“For years, Intuit misled the most vulnerable among us to make a profit,” New York Attorney General Letitia James said in a statement. “Today, every state in the nation is holding Intuit accountable.”
New York and Tennessee led the state probe.
Intuit, based in Mountain View, admitted no wrongdoing and expects “minimal” impact to its business.
Intuit General Counsel Kerry McLean said the accord also addresses claims in a related U.S. Federal Trade Commission lawsuit, making that case “entirely unnecessary.”
The FTC declined to comment.
It had sued Intuit on March 28 over its ads, saying about two-thirds of tax filers, including gig workers and people with farm income, could not use free TurboTax products.
In morning trading, Intuit shares were down $10.93, or 2.5%, at $419.91.
Updated at 4 p.m. May 5, 2022
Times of San Diego contributing editor Ken Stone contributed to this report.