In a March 28 filing, the Federal Trade Commission (FTC) announced it was suing Intuit, the maker of TurboTax tax filing software, by issuing an administrative complaint against the company. Via a March 29 press release which followed, the FTC claimed that Intuit is deceiving consumers with “bogus advertisements pitching ‘free’ tax filing that millions of consumers could not use.”
In addition, to prevent ongoing harm to consumers rushing to file their taxes, the Commission also filed a federal district court complaint asking a court to order Intuit to “halt its deceptive advertising immediately,” according to a press release.
The lawsuit comes just weeks before the tax filing deadline.
The FTC alleges that the company’s “ubiquitous advertisements touting their supposedly ‘free’ products” mislead consumers into believing that they can file their taxes for free with TurboTax.
“In fact, most tax filers can’t use the company’s ‘free’ service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product,” the FTC said in the release.
The FTC added that Intuit had engaged in a years-long marketing campaign centered on the promise of “free” services, and that these ads have run during major events, including the Super Bowl, and have also aired during this year’s NCAA Basketball Tournament.
In the complaint, the FTC charges that — for many — “Intuit tells them, after they have invested time and effort gathering and inputting into TurboTax their sensitive personal and financial information to prepare their tax returns, that they cannot continue for free; they will need to upgrade to a paid TurboTax service to complete and file their taxes.”
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” Samuel Levine, Director of the Bureau of Consumer Protection, said in a press release. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
Following the complaint, Senator Elizabeth Warren tweeted: “@Intuit pads its profits by advertising free tax filing services and then tricking low-income Americans into paying through the nose. @FTC is right to crack down on their deceptive practices & I urge the IRS to create its own, truly free filing software.”
The FTC reminded consumers — those whose adjusted gross income is $73,000 or less, at least — that products are available within the IRS Free File Program. These options are offered by several different companies, allowing eligible taxpayers to file their federal tax return (and, in some instances, state tax return) entirely for free.
Intuit issued a press release in response to the filing, saying that “the FTC’s arguments are simply not credible.”
“Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep,” Kerry McLean, executive vice president and general counsel of Intuit, said in the release. “Over the past eight years, TurboTax products have helped nearly 100 million Americans file their taxes for free, and our most recent free advertising campaign has only accelerated the use of TurboTax free offerings, driving approximately 60% growth from 11 million free filers in 2018 before the campaign launched to more than 17 million free filers in 2021.”
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