Did you happen to see a new TurboTax advertisement showing a fictional connoisseur of free products named Marcus learning about the TurboTax free edition? In the ad, Marcus, who loves "anything that's free," reads a disclaimer to confirm whether he can file his taxes 100% free using TurboTax software. This ad comes as Intuit, maker of TurboTax, has been accused of deceptive advertising practices by the Federal Trade Commission (FTC).
In an opinion and final order issued Monday, the FTC found that Intuit misled consumers with "free" tax products and services that many people were not eligible for. The Commission found this to violate the FTC Act, which prohibits deceptive acts and practices. The final order requires Intuit to stop making deceptive claims.
Intuit has said it will appeal the order, stating in a release that it has “always been clear, fair, and transparent with its customers and is committed to free tax preparation.” The current TurboTax ad states that about 37% of taxpayers qualify for the free edition.
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Last year, the company sent TurboTax settlement checks to millions of taxpayers after settling a multi-state lawsuit involving similar claims. Here’s what else you should know.
FTC TurboTax lawsuit
In its complaint against Intuit, the creator of TurboTax, the FTC accused the company of misleading consumers with false "free" tax filing ads. The FTC argued that Intuit's marketing led users to believe they could file taxes for free. (Most taxpayers weren't eligible for the free TurboTax option.)
In a statement about the lawsuit, Samuel Levine, Director of the Federal Bureau of Consumer Protection, condemned the "bait-and-switch" tactics that imposed unexpected charges on consumers.
What does this mean? Intuit is banned under the order from advertising anything free unless the product or service is genuinely available for all consumers or clearly discloses the percentage of eligible consumers. The FTC order also requires Intuit to disclose all terms, conditions, and obligations for obtaining the "free" product or service.
- FTC says Intuit also cannot misrepresent material facts about its products, including price, refund policies, and consumers' ability to claim tax credits or deductions.
- The Commission's vote was unanimous, 3-0. However, Intuit plans to appeal.
TurboTax settlement
This FTC order comes after a $141 million settlement involving Intuit, the maker of TurboTax. The settlement resulted in millions of people — many with lower incomes — receiving checks in the mail last year.
Intuit settled a multi-state legal dispute over how the company marketed its tax preparation software from 2016 to 2018. About 4.4 million people who believed they were getting TurboTax for free ended up paying for the product, some reportedly as much as $100.
IRS Free File
As filing season officially begins next week, the IRS Free File program has expanded this tax season and is now open. Free federal income tax filing options are available for taxpayers with an adjusted gross income of $79,000 or less in 2023. However, some IRS Free File trusted partners charge a fee for state tax preparation.
Additionally, for this 2024 tax season, the IRS is piloting a tax prep program in 13 states that will allow a select group of taxpayers to file their tax returns online, directly with the IRS, for free. The Direct File program limited pilot will help the agency determine the feasibility of implementing a larger-scale filing option.
As Kiplinger has reported, Intuit TurboTax and H&R Block have opposed the IRS getting into the business of tax return prep and direct filing.
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