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AG Healey Secures Relief for Consumers in $140 Million Nationwide Settlement Against TurboTax  

BOSTONThe owner of TurboTax, Intuit Inc., will pay a total of $141 million, including payments to millions of low-income consumers and military service members across the country, as part of a settlement reached by Massachusetts Attorney General Maura Healey and all 50 states as well as the District of Columbia over claims that the company deceived consumers into paying for tax services that should have been free. The settlement also requires the company to suspend TurboTax’s “free, free, free” ad campaign that lured consumers with promises of free tax preparation services, only to deceive them into paying for services.

Under the terms of the settlement, Massachusetts will receive $2.3 million for tens of thousands of eligible consumers who were allegedly deceived into paying to file their federal tax return.

“TurboTax’s misleading tactics caused millions of vulnerable consumers across the country to pay for tax preparation services that should have been free,” said AG Healey. “This nationwide settlement will bring money back to Massachusetts consumers who were harmed and prevent this deception from happening again.”

An investigation into Intuit began after reviewing allegations that the company was using digital tactics to steer low-income consumers toward its commercial products and away from federally-supported free tax services.

Intuit offered a free version of TurboTax through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service (IRS), which allows taxpayers earning roughly $34,000 and members of the military to file their taxes for free. In exchange for participating in the program, the IRS agreed not to compete with Intuit and other companies by providing its own electronic tax preparation and filing services to American taxpayers.

Intuit also offered a commercial product called “TurboTax Free Edition,” which is only free for taxpayers with “simple returns” as defined by Intuit. In recent years, TurboTax has marketed this “freemium” product aggressively, including through ad campaigns where “free” is the most prominent or sometimes the only selling point. In some ads, the company repeated the word “free” dozens of times in as short as 30 seconds. However, the TurboTax “freemium” product is only free for approximately one-third of US taxpayers. In contrast, the TurboTax Free File product was free for 70 percent of taxpayers.

The multistate investigation found that Intuit limited consumers’ participation in the IRS Free File Program, including by using confusingly similar names for both its IRS Free File product and its commercial “freemium” product. Intuit bid on paid search advertisements to direct consumers who were looking for the IRS Free File product to the TurboTax “freemium” product instead. Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free. TurboTax’s website also included a “Products and Pricing” page that stated it would “recommend the right tax solution,” but never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.

Intuit withdrew from the IRS Free File program in July 2021.

Under the terms of the settlement, Intuit will pay $141 million in restitution to millions of consumers who started using TurboTax’s Free Edition for tax years 2016 through 2018 and were told that they had to pay to file even though they were eligible to file for free using the version of TurboTax offered as part of the IRS Free File program. Impacted consumers are expected to receive a direct payment in the mail of approximately $30 for each year that they were deceived into paying for filing services.

Intuit has also agreed to reform its business practices, including:

  • Refraining from making misrepresentations in connection with promoting or offering any online tax preparation products;
  • Enhancing disclosures in its advertising and marketing of free products;
  • Designing its products to better inform users whether they will be eligible to file their taxes for free; and
  • Refraining from requiring consumers to start their tax filing over if they exit one of Intuit’s paid products to use a free product instead.

Today’s recovery for Massachusetts consumers is the result of an investigation into tax preparation software by AG Healey’s office. The AG’s Office began an independent review of Intuit, issuing subpoenas and gathering information from Intuit and third parties, and then later joined with the New York and other state attorneys general as part of a multistate group reviewing Intuit’s conduct nationwide. The Federal Trade Commission coordinated with the states and has sued Intuit over this same conduct as well. 

Borrowers eligible for relief under this settlement will be contacted by the settlement administrator. Massachusetts consumers with questions about this matter may contact AG Healey’s Insurance and Financial Services Division at 888-830-6277.