CONNECTICUT, USA — Attorney General Tong has secured $1.2 million for 40,842 Connecticut residents who will receive restitution payments from the owner of TurboTax, Intuit Inc. for deceiving consumers into paying for tax services that should have been free.
This is all part of a multistate agreement where Intuit will pay $141 million in restitution to millions of low-income consumers nationwide who were unfairly charged.
“TurboTax marketed their services as ‘free, free, free,’ but what they really meant was ‘fee, fee, fee.’ More than 40,000 Connecticut consumers were tricked into paying for these supposedly free tax services. Our agreement forces TurboTax to pay back $141 million in restitution nationwide—including $1.2 million to Connecticut consumers. If you are eligible for this restitution, you do not need to take any action. Impacted consumers will automatically receive a notice and check in the mail for $29.64,” said Attorney General Tong in a statement.
Inuit must also suspend TurboTax's "free, free, free” ad campaign that lured customers with promises of free tax preparation services only to deceive them.
All 50 states and the District of Columbia have signed the agreement.
The investigation into Intuit began ProPublica reported that the company was using deceptive digital tactics to get low-income consumers toward its commercial products and away from federally-supported free tax services.
Two free versions of TurboTax were offered by Inuit. One of them is through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service, which allows taxpayers earning around $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to American taxpayers.
Intuit also offered a commercial product called “TurboTax Free Edition,” which is only free for taxpayers with “simple returns”. In recent years, TurboTax has marketed this “freemium” product aggressively, including through ad campaigns where “free” is the most prominent or sometimes the only selling point. In some ads, the company repeated the word “free” dozens of times in as short as 30 seconds. However, the TurboTax “freemium” product is only free for approximately one-third of US taxpayers. In contrast, the TurboTax Free File product was free for 70 percent of taxpayers.
The multistate investigation found that Intuit had engaged in deceptive and unfair trade practices, which limited people's participation in the IRS free file program. The company used "confusingly" similar names for the IRS product and the commercial "freemium" product. Intuit bid on paid search advertisements to direct people to the "freemium" product instead. They also blocked the IRS Free File landing page from the search engine in 2019. The “Products and Pricing” page stated it would “recommend the right tax solution,” but it never recommended the IRS Free File program even when they were ineligible for "Freemium."
Restitution will be provided to people who began using the free edition for the tax years 2016 to 2018 and were told they had to pay. Consumers can expect to receive a $30 payment for each year they were deceived into paying for the filing services.
Intuit withdrew from the IRS Free File program in July 2021.
Impacted consumers will automatically receive notices and a check by mail.
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