FTC sues Intuit to stop ads claiming TurboTax is 'free'
March 29 (UPI) -- The Federal Trade Commission has sued Intuit, alleging it has deceived consumers for years by marketing its TurboTax tax filing software as free and subsequently charging most users.
The complaint, filed in the U.S. District Court for the Northern District of California on Monday, asks a federal court to "put an immediate halt to Intuit's false advertising" in which the company frequently uses the word "free" to advertise its produc
"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 statement. "We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season."
In its complaint, the FTC cites one ad in which an auctioneer repeatedly says the word "free," a second "in which a court stenographer recorded a legal proceeding in which 'free' was the only word used," and another "in which an exercise class instructor chants 'free' while leading a group workout."
"In several ads, the word 'free' is repeated over 40 times in a 30-second ad," the complaint states.
The FTC, however, alleges that the "freemium" version of TurboTax is only available to users with what Intuit describes as "simple" tax returns while others are required to upgrade to paid versions of TurboTax.
Additionally, the definition of a "simple" return changes yearly, the FTC said. In 2021, Intuit identified simple returns as ones that can be filed on a Form 1040 with limited attached schedules.
The suit alleges that about two-thirds of tax filers were unable to use TurboTax's free product in 2020.
It also notes that until 2021, TurboTax was offered for free online to taxpayers with $39,000 or less in adjusted gross income as part of the IRS Free File program, a public-private partnership formed in 2002 that allows low-income Americans to file their taxes for free online.
Intuit issued a statement responding to the lawsuit on Monday, saying that the claims made by the FTC are "simply not credible" while noting that nearly 100 million Americans have filed their taxes for free with TurboTax in the past eight years, including 17 million in 2021, up from 11 million in 2018 before the ad campaign launched.
"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," said Kerry McLean, executive vice president and general counsel for Intuit.
McLean also noted that the FTC's lawsuit did not take into account the fact that Intuit complied with IRS requirements while part of the Free File program.
"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 said. "With the FTC's action, companies will be much less willing to enter into public-private partnerships with the government that benefit consumers."
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