Did you try TurboTax thinking it’s free, only to pay a fee?
In a new lawsuit, the FTC claims that millions of Americans were duped by deceptive ads for TurboTax’s allegedly free tax-filing service. Allegedly, advertising and other tactics are merely tempting consumers to pay for a paid TurboTax product.
“Turbo Tax is bombarding consumers with ads for ‘free’ tax filing services, and then charging them when it’s time to file,” says Samuel Levine, director of the FTC Consumer Protection Bureau. “We are asking a court to stop this bait-and-switch immediately and protect taxpayers at the peak of filing season.”
On Monday, the FTC filed a complaint in a US District Court in California, seeking to stop TurboTax’s developer Intuit for alleged deceptive advertising practices. The same lawsuit also asks the judge to grant reasonable relief, which could give Intuit a hefty fine if it loses the case.
“As described in the complaint, Intuit engaged in a year-long marketing campaign focused on the promise of ‘free’ services. These ads have been run during major events, including the Super Bowl, and this year’s NCAA Basketball Tournament. have also circulated during the trial,” the FTC said in Tuesday’s announcement about the lawsuit.
Many of these ads, along with Intuit’s websites, by literally repeating the words “free, free, free, free” emphasize the supposedly free nature of TurboTax. But once users have actually submitted all of their documents and completed all of 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 those who only need to file Form 1040, according to the FTC.
Other users who need to report income through another tax form will have to 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, for example, providing rideshare services or delivering groceries,” the FTC says. In previous years, users claiming the student loan interest deduction were also required to pay for the upgrade.
The FTC also points out that Intuit’s strategy has 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 may qualify for these services at no additional 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 dropped it last year. Still, when the company piloted the free tax filing option, Intuit reportedly tried to block users from finding it, the FTC claims, citing internal statements from Intuit employees.
Despite the allegations, Intuit said it would “strongly challenge” the FTC’s lawsuit in court. “The FTC’s arguments are not credible,” EVP Kerry McLean said in a statement. “Far from keeping taxpayers out of free tax preparation offers, our free advertising campaigns have inspired more Americans than ever to file their taxes for free and to raise awareness of free tax preparation. are central.”
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 accelerated the use of TurboTax free offerings, 11 million free filers in 2018 before the campaign began to move to over 17 million free filers in 2021.”