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Intuit, owner of the popular TurboTax tax filing software, will pay $ 141 million in restitution to millions of low-income Americans who were “unfairly charged” for services that were supposed to be free, according to the multisite. agreement announced on Wednesday.

TurboTax has also agreed to reform its business practices. For example, he has to stop a “free, free, free” advertising campaign that “lures” customers with the promise of free tax training, but then asks them to pay, according to message by New York Attorney General Leticia James.

All 50 states and the District of Columbia have signed the agreement.

Intuit has not acknowledged wrongdoing as part of the agreement and expects minimal impact on its business from the changes, according to the company statement.

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“Intuit is clear and fair to its customers, including the nearly 100 million Americans who have filed taxes for free with our products in the past eight years – more than any other tax preparation software company combined,” said Kerry McLean. Executive Director of Intuit Vice President and General Counsel.

Intuit will pay the restitution of nearly 4.4 million users who used the free edition of TurboTax in the tax years 2016 to 2018. These customers were told they had to pay for the service, although they are eligible to file for free through the IRS Free File program offered by TurboTax, according to the announcement.

Consumers are expected to receive about $ 30 for each year they pay for services, the statement said. Users will automatically receive notifications and a check by mail.

“Intuit has defrauded millions of low-income Americans of the free tax services they are entitled to,” James said in a statement. “For years, Intuit has misled the most vulnerable among us to make a profit. Today, every state in the nation holds Intuit responsible for defrauding millions of taxpayers, and we are putting millions of dollars back into the pockets of affected Americans.”

Accusations and reforms

Until recently, Intuit offered two free versions of TurboTax. One was through the IRS’s Free File Program, a public-private partnership that allows low-income Americans to file their taxes for free. Intuit ended its participation in July 2021. (This version of TurboTax was available to taxpayers with incomes below about $ 39,000 and members of active military service with incomes below $ 72,000 in the 2020 tax year).

Intuit has aggressively launched another version, TurboTax Free Edition, as “free”, but it is only free for taxpayers with “simple” declarations, as defined by Intuit, according to the announcement. Consumers without a simple declaration must upgrade to a paid version of the tax service; however, these individuals may be eligible for the IRS Free File Program.

(For tax year 2021, Intuit refers to a simple return as such that can be filed on Form 1040 with limited attached schedules, such as one that includes interest paid on a student loan, according to the Federal Trade Commission.)

The service will be free for about a third of U.S. taxpayers, while IRS Free File products will be free for about 70 percent, according to the announcement.

We believe that this agreement with the Attorney General of the State and the District of Columbia also addresses the issues that underlie the FTC’s lawsuit.

Carrie McLean

Executive Vice President and General Counsel at Intuit

Prosecutors allege that Intuit violated U.S. consumer laws by engaging in fraudulent and unfair marketing, advertising and sales of online tax training, according to agreement.

For example, in fiscal 2018, Intuit hid the landing page for its IRS Free File program from search engines for about five months during the peak of the tax season, they claim.

In addition, the company’s TurboTax homepage has led consumers to think they qualify for the “freemium” service, and the product and pricing screen does not mention Free File Product, “prevents users from learning about its existence”. it is said.

Last tax season, Intuit provided more than 17 million free tax returns, the most in the industry and many times more than the IRS’s free file program, according to a company statement. It is expected to help more than 40 million taxpayers prepare and file their tax returns for free over the next three years.

TurboTax has agreed to change some of its business practices, including: better informing consumers whether they will be eligible to file their taxes for free and refraining from requiring consumers to restart their tax return if they switch from a paid product to a free one. one, the message said.

The Federal Trade Commission filed a lawsuit alleging allegations in the United States in March. This case is ongoing.

“We believe that this agreement with the Attorney General of the State and the District of Columbia also addresses the issues that underlie the FTC’s lawsuit, making it completely unnecessary,” McLean told Intuit. “However, we are fully prepared to sue the Federal Trade Commission to prove the validity of our case.”

An FTC spokesman declined to comment on the allegations.

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