TurboTax, a California-based tax filing company owned by Intuit, has agreed to a settlement totaling $141 million to be distributed to customers across the United States. The settlement comes after the company was accused of using deceptive advertising practices, specifically in products that are supposed to be free for working-class filers who are legally entitled to file their taxes for free.
While TurboTax denies any wrongdoing, they are on the hook for over $100 million in settlement cash, per the lawsuit.
Here’s what you need to know.
The settlement is related to Intuit’s two free versions of TurboTax.
If you’ve filed taxes in the United States, you know what TurboTax is. But what you might not know is that the company offers two free versions of its tax-filing software, one of which came through a partnership with the IRS Free File Program.
The partnership program allows lower-income taxpayers, which included people who make roughly $34,000 a year, plus members of the military, to use the program at no cost to file their taxes. In exchange, the Internal Revenue Service (IRS) agreed not to create its own tax prep service and compete with Intuit.
Another program offered by TurboTax was the Free Edition which allowed people who have “simple returns” to file using their program without any cost. According to Fox59 News, one-third of U.S taxpayers would have been eligible for the company’s Free Edition and 70 percent of taxpayers would have qualified for the TurboTax partnership with IRS Free File Products.
The settlement comes after Intuit was accused of using deceptive practices.
In 2019, a ProPublica report found that Intuit “used deceptive tactics to steer low-income consumers toward its commercial products and away from federally supported free tax services,” Fox59 News reported.
The practices Intuit was accused of participating in include allegedly using “confusingly similar” names for the free and paid products, reportedly blocking the IRS Free File service landing page from online search results and they were accused of bidding on paid search results that pointed customers to use the “freemium” software instead of the free versions they were eligible to participate in.
Intuit didn’t admit any wrongdoing but agreed to a $141 million settlement.
As part of the settlement, Intuit didn’t admit to any wrongdoing, but agreed to pay $2.5 million in administrative costs related to the lawsuit with the remaining cash going toward customers. More than 4.4 million taxpayers are eligible under the settlement terms, which were signed by the attorneys general in all 50 states.
Customers who paid for the TurboTax service to file their taxes who otherwise would have been eligible for the free services will receive a payment of $30 for each year they were affected from 2016 through 2018, the settlement states. Consumers will receive a direct payment automatically and will receive notices through the mail.