Did you try TurboTax thinking it was free, only to end up paying a fee?
In a new lawsuit, the FTC claims millions of Americans were duped by deceptive ads for TurboTax’s supposedly free tax-filing service. Allegedly, the ads and other tactics are merely bait to trick consumers into paying for the paid TurboTax product.
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” says FTC Consumer Protection Bureau Director Samuel Levine. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
On Monday, the FTC filed a complaint with a US District Court in California, demanding TurboTax’s developer Intuit stop the alleged deceptive advertising practices. The same lawsuit also asks the judge to award appropriate relief, which could entail Intuit paying a major fine if it loses the case.
“As detailed in the complaint, Intuit engaged in a years-long marketing campaign centered on the promise of 'free' services. These ads have run during major events, including the Super Bowl, and have also aired during this year’s NCAA Basketball Tournament,” the FTC said in a Tuesday announcement about the lawsuit.
Many of these ads, along with Intuit’s websites, emphasize the supposed free nature of TurboTax by literally repeating the words “Free, free, free, free.” But once users actually submit all their documents and finish completing all the forms, TurboTax will tell them they don’t qualify for the free service. That’s because the “Turbo Tax Free Edition” product applies to “simple” tax returns covering people who only need to file a Form 1040, according to the FTC.
Other users who need to report income through other tax forms must instead pay to upgrade, regardless of their income. “This includes consumers who receive independent contractor or small business income, such as consumers working in the gig economy by, for example, providing rideshare services or delivering groceries,” the FTC says. In previous years, users who claimed student loan interest deductions were also required to pay for an upgrade.
The FTC also points out the tactics from Intuit have prevented consumers from using free tax filing services, which are sponsored by the IRS. Americans with an annual gross income of $73,000 per year can qualify for these services at no extra charge. (Interested users can check out our guide to learn more.)
Intuit itself was also part of the IRS’s free tax filing program, but left it last year. Still, when the company did operate the free tax filing option, Intuit allegedly tried to prevent users from finding it, the FTC claims, citing internal statements from Intuit employees.
Despite the allegations, Intuit said it’ll “vigorously challenge” the FTC’s lawsuit in court. “The FTC’s arguments are simply not credible,” EVP Kerry McLean says in a statement. “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.”
McLean adds: “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."