TurboTax promised free tax filing — then hit customers with hidden charges, feds say
Hayley Fowler, The Charlotte Observer
TurboTax is touting its online tax preparation services as free to millions of consumers before hitting them with hidden costs when it comes time to file, the Federal Trade Commission has said in a new civil lawsuit.
The FTC, a federal agency tasked with protecting consumers from unfair and deceptive business practices, accused TurboTax’s parent company — Intuit Inc. — of deceptive advertising in a federal complaint filed on Monday, March 28, in the Northern District of California.
In addition to the lawsuit, the FTC has asked for a temporary restraining order that would block Intuit from continuing to advertise TurboTax as free.
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” Samuel Levine, director of the Bureau of Consumer Protection, said in a news release. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
Intuit denied the allegations, saying in a statement that the FTC has painted an inaccurate picture of its advertising practices.
“The FTC’s arguments are simply not credible. 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,” Kerry McLean, executive vice president and general counsel of Intuit, said in a statement.
According to the FTC’s 31-page complaint, TurboTax lets customers with “simple” tax returns file for free but requires other customers to upgrade for a fee using what the FTC referred to as “hard stops.”
TurboTax asks customers a series of questions about their finances when they begin the filing process to determine if they are eligible for the free version, the FTC said.
For example, if they indicate the need to report certain types of income using a 1099 form, TurboTax will display a “hard stop” telling the customer they need to pay for an upgrade to accurately report that income. Some examples of taxpayers who use a 1099 form include independent contractors, ride-share drivers and food delivery workers.
About two-thirds of people who file taxes couldn’t use TurboTax’s free product in 2020, the FTC said.
Yet TurboTax promotes its services as “free” in television commercials and online, according to the complaint. Intuit aired at least six different advertisements during its “Free, Free, Free, Free” campaign “in which ‘free’ is essentially the only word spoken,” the FTC said. The TurboTax homepage has also boasted various promises about “free” filings over the years, according to the agency.
“Intuit continues to bombard consumers with the message that they can file their taxes for ‘free,’” the lawsuit states. “Intuit baits consumers with deceptive ads and then compound the deception with more false claims and buried disclosures.”
In response, Intuit has pointed to its status as a “founding member of the IRS Free File program,” which was formed in 2002 between the IRS and several online tax preparation companies.
Intuit said it has helped the IRS Free File program “far exceed its stated goals of making free tax preparation available to 70% of filers.” As a participant in the program, the company also said it had to follow certain marketing requirements set by the IRS.
“The fact that Intuit complied with the rules and regulations of one government agency, but is now being targeted by another, demonstrates a significant disconnect,” McLean, Intuit’s general counsel, said in the release.
Intuit left the Free File Program last year, the FTC said.
The company has since filed a notice of its intent to oppose the FTC’s bid for a temporary restraining order, saying the agency waited until just before taxes are due on April 18 to lodge a complaint based on alleged deceptive advertising practices it claims to have known about for years.
Intuit’s lawyers also said the company has already pulled some of the advertisements in questions — which the FTC allegedly knew before filing its lawsuit. Company officials reportedly told FTC on March 24 that they would remove the “free, free, free” television ads for the remainder of the tax season, court documents state.
The FTC, meanwhile, has said consumers “continue to suffer substantial injury” from Intuit’s TurboTax advertisements and called on a federal judge to issue the temporary restraining order.
©2022 The Charlotte Observer. Visit charlotteobserver.com. Distributed by Tribune Content Agency, LLC.
TurboTax is touting its online tax preparation services as free to millions of consumers before hitting them with hidden costs when it comes time to file, the Federal Trade Commission has said in a new civil lawsuit.
The FTC, a federal agency tasked with protecting consumers from unfair and deceptive business practices, accused TurboTax’s parent company — Intuit Inc. — of deceptive advertising in a federal complaint filed on Monday, March 28, in the Northern District of California.
In addition to the lawsuit, the FTC has asked for a temporary restraining order that would block Intuit from continuing to advertise TurboTax as free.
“TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” Samuel Levine, director of the Bureau of Consumer Protection, said in a news release. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
Intuit denied the allegations, saying in a statement that the FTC has painted an inaccurate picture of its advertising practices.
“The FTC’s arguments are simply not credible. 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,” Kerry McLean, executive vice president and general counsel of Intuit, said in a statement.
According to the FTC’s 31-page complaint, TurboTax lets customers with “simple” tax returns file for free but requires other customers to upgrade for a fee using what the FTC referred to as “hard stops.”
TurboTax asks customers a series of questions about their finances when they begin the filing process to determine if they are eligible for the free version, the FTC said.
For example, if they indicate the need to report certain types of income using a 1099 form, TurboTax will display a “hard stop” telling the customer they need to pay for an upgrade to accurately report that income. Some examples of taxpayers who use a 1099 form include independent contractors, ride-share drivers and food delivery workers.
About two-thirds of people who file taxes couldn’t use TurboTax’s free product in 2020, the FTC said.
Yet TurboTax promotes its services as “free” in television commercials and online, according to the complaint. Intuit aired at least six different advertisements during its “Free, Free, Free, Free” campaign “in which ‘free’ is essentially the only word spoken,” the FTC said. The TurboTax homepage has also boasted various promises about “free” filings over the years, according to the agency.
“Intuit continues to bombard consumers with the message that they can file their taxes for ‘free,’” the lawsuit states. “Intuit baits consumers with deceptive ads and then compound the deception with more false claims and buried disclosures.”
In response, Intuit has pointed to its status as a “founding member of the IRS Free File program,” which was formed in 2002 between the IRS and several online tax preparation companies.
Intuit said it has helped the IRS Free File program “far exceed its stated goals of making free tax preparation available to 70% of filers.” As a participant in the program, the company also said it had to follow certain marketing requirements set by the IRS.
“The fact that Intuit complied with the rules and regulations of one government agency, but is now being targeted by another, demonstrates a significant disconnect,” McLean, Intuit’s general counsel, said in the release.
Intuit left the Free File Program last year, the FTC said.
The company has since filed a notice of its intent to oppose the FTC’s bid for a temporary restraining order, saying the agency waited until just before taxes are due on April 18 to lodge a complaint based on alleged deceptive advertising practices it claims to have known about for years.
Intuit’s lawyers also said the company has already pulled some of the advertisements in questions — which the FTC allegedly knew before filing its lawsuit. Company officials reportedly told FTC on March 24 that they would remove the “free, free, free” television ads for the remainder of the tax season, court documents state.
The FTC, meanwhile, has said consumers “continue to suffer substantial injury” from Intuit’s TurboTax advertisements and called on a federal judge to issue the temporary restraining order.
©2022 The Charlotte Observer. Visit charlotteobserver.com. Distributed by Tribune Content Agency, LLC.
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