TurboTax will pay $141 million to residents in every state and Washington D.C. for misleading claims that its tax preparation services are free, New York Attorney General Letitia James announced Wednesday.
Under the agreement, a total of 4.4 million taxpayers who used TurboTax's free edition for tax years 2016 through 2018 will get a direct payment of approximately $30 for each year. These users were told that they had to pay to file, even though they were eligible to file for free using the IRS Free File program, which the Intuit withdrew from in 2021. In New York, 176,000 residents who were "tricked into paying to file their federal tax return" will receive a total of more than $5.4 million.
TurboTax will also be forced to suspend its “free, free, free” ad campaign as part of the agreement and will need to redesign its product to better inform users when they can file their taxes for free.
“For years, Intuit misled the most vulnerable among us to make a profit," James said in a statement. "Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans."
An investigation into the service was first opened after ProPublica reported in 2019 on the company's deceptive digital tactics targeting low-income users. The investigation found that Intuit, the company that owns TurboTax, engaged in deceptive and unfair trade practices.
Though TurboTax is free for some users, it is only free for those with "simple returns," though the company pushed in its marketing that the service was free to use. According to the office of the New York attorney general, TurboTax's free service was only applicable to one-third of U.S. taxpayers, whereas the the IRS Free File products were free to use for 70% of taxpayers.
Intuit has come under fire for its practices from officials in recent months. The Federal Trade Commission accused Intuit of having deceptive and misleading practices in late March, though Intuit denied those claims, saying the commission's arguments "are simply not credible." And in mid-April, Sen. Elizabeth Warren, as well as Reps. Katie Porter and Brad Sherman, said in a letter to Intuit CEO Sasan Goodarzi that TurboTax offers products that "scam American taxpayers into paying for services that should be free."
Correction: An earlier version of this story said the IRS withdrew from its Free File Program rather than Intuit. This story was updated on May 4, 2022.