OKLAHOMA CITY — Consumers who were tricked by TurboTax owner Intuit into paying for free tax services will begin receiving checks from a $141 million multistate settlement, Attorney General Gentner Drummond announced recently.
Approximately 4.4 million consumers nationwide will receive checks in the mail from the multistate settlement. Oklahoma will receive more than $1.7 million for more than 56,000 people who were tricked into paying to file their federal tax return. Eligible consumers will be contacted by email about the settlement and will not need to file a claim. Checks will be mailed throughout this month, Drummond said.
The Federal Trade Commission issued an administrative complaint against the company for deceiving consumers with advertisements pitching “free” tax filing that millions of consumers could not use.
The FTC alleged that the company’s ubiquitous advertisements touting their supposedly “free” products – some of which consisted almost entirely of the word “free” spoken repeatedly – mislead consumers into believing they could file their taxes for free with TurboTax.
In fact, most tax filers couldn’t use the company’s “free” service because it was not available to millions of taxpayers, such as those who got a 1099 form for work in the gig economy, or those who earned farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.
In truth, TurboTax was free for only some users, based on the tax forms they need. According to the administrative complaint, since at least 2016, it was only after people spent time entering sensitive personal and financial information that many learned they’d need to upgrade to a paid TurboTax product to complete and file their taxes.
Since at least 2017, Intuit called the “freemium” version of TurboTax the “TurboTax Free Edition.” In 2016, Intuit called the “freemium” version of TurboTax the “Federal Free Edition.” The “freemium” version of TurboTax was available only to consumers with “simple” tax returns, as defined by Intuit; other consumers were required to upgrade to paid versions of TurboTax.
What “simple” means can be a matter of interpretation, and Intuit’s definition of “simple” changed over time.
TurboTax was “bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges” when it was time to file, said Samuel Levine, director of the Bureau of Consumer Protection. A legal action was initiated in April 2022 “to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
Subsequently, New York Attorney General Letitia James, with assistance from the attorneys general of Tennessee, Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Texas, and Washington, announced a $141 million multistate agreement with Intuit for deceiving millions of low-income Americans into paying for tax services that should have been free. All 50 states and the District of Columbia signed onto the agreement.
Eligible consumers include those who paid to file their federal tax returns through TurboTax for tax years 2016, 2017 and 2018 but were eligible to file for free through the IRS Free File Program. Consumers who are eligible for a payment will be notified by email by the settlement fund administrator, Rust Consulting. These consumers will receive a check in the mail automatically, without filing a claim.
The amount each consumer receives will be based on the number of tax years for which they qualify. Most consumers are expected to receive between $29 and $30. For more information about who is covered by the settlement, and information about the settlement fund, visit www.AGTurboTaxSettlement.com.