WASHINGTON – The Federal Trade Commission has taken action against Intuit, the maker of the popular TurboTax tax filing software.
The FTC issued an administrative complaint against the company for deceiving consumers with 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.
The commission alleges that the company’s ubiquitous advertisements touting their supposedly “free” products – some of which have consisted almost entirely of the word “free” spoken repeatedly – mislead consumers into believing 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.
In truth, TurboTax is 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 has 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 is available only to consumers with “simple” tax returns, as defined by Intuit; other consumers are required to upgrade to paid versions of TurboTax.
What “simple” means can be a matter of interpretation, and Intuit’s definition of “simple” has changed over time.
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, director of the Bureau of Consumer Protection. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
As detailed in the complaint, Intuit engaged in a yearslong marketing campaign centered on the promise of “free” services. These ads have run during major events, including the Super Bowl, and also have aired during this year’s NCAA basketball tournament.
This year, consumers whose adjusted gross income is $73,000 or less can use products in the IRS Free File Program, which are offered by several different companies, to file their federal tax return and, in some instances, state tax return, entirely for free. More information about the Free File Program is available at irs.gov/freefile.
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