Attorney General Keith Ellison secures $1.8M for low-income Minnesotans deceived by TurboTax
Joins all 50 states in agreement with TurboTax owner Intuit for deceiving low-income Americans into paying for free tax services; as many as 60,000 Minnesotans to be refunded
May 5, 2022 (SAINT PAUL) — Minnesota Attorney General Keith Ellison today secured more than $1.8 million in refunds for low-income Minnesota taxpayers from Intuit Inc., the owner of TurboTax, after the company deceived consumers into paying for tax services that should have been free. The refunds to Minnesota customers come as part of a multistate settlement agreement between Intuit and all 50 states and the District of Columbia in which Intuit will pay $141 million in restitution to millions of consumers across the nation who were illegally charged. In addition, Intuit must suspend TurboTax’s deceptive “free, free, free” ad campaign that lured customers with false promises of free tax preparation services, only to deceive them into paying for services that the company promised were free.
As many as 60,000 low-income Minnesota consumers who were eligible for free filing but were defrauded into paying for Intuit’s tax-preparation service will receive at least partial refunds under the settlement.
“Part of my job of helping Minnesotans afford their lives is protecting them from predatory corporations. I joined this investigation and settlement because Intuit’s business practices defrauded Minnesotans. The settlement we’ve reached will put money back in the pockets of low-income consumers that Intuit deceived into paying for tax-preparation services that should have been free,” said Attorney General Keith Ellison. “The settlement also cracks down on Intuit’s egregiously fraudulent practices and prohibits the company from engaging in them in the future. Make no mistake: I’m prepared to take action against companies that deliberately deceive Minnesotans, like Intuit did for years.”
Results of investigation into TurboTax and Intuit
This settlement comes after nearly two years of investigation by the states that revealed Intuit orchestrated a widespread scheme to deceive millions of low-income consumers who were eligible for free tax-preparation service into paying for the company’s products. Under a long-standing public-private partnership with the Internal Revenue Service (IRS), Intuit was required to provide a free tax-filing program to low-income taxpayers; in exchange, the IRS agreed not to compete with Intuit and other tax-prep companies by providing its own electronic tax preparation and filing services to American taxpayers. The states’ investigation revealed Intuit’s brazen attempts to deliberately steer as many low-income taxpayers away from this free filing program as possible, despite its agreement with the IRS, and demonstrated that Intuit instead deceived these consumers into purchasing the company’s for-pay tax-preparation services. For example:
- Intuit’s for-pay service was deceptively branded and titled as being free, using the name “TurboTax Free Edition,” while the company’s free filing program that it offered under its agreement with the IRS and was actually free did not indicate that the service was free;
- Intuit bid on paid search advertisements to deceptively direct consumers who were looking for free tax preparation services to its for-pay service instead; and
- Intuit, at times, deliberately made its free filing product inaccessible from search engines, even when consumers searched for free tax preparation services.
The states’ investigation also revealed the misleading nature of Intuit’s widespread advertising campaigns. In some ads, the company repeated the word “free” dozens of times in ads as short as 30 seconds. These ads, however, promoted an Intuit tax preparation product that was free to only approximately one-third of US taxpayers, and did not contain adequate disclosures that the product most likely would cost consumers money.
Terms of the settlement with Intuit
Under the agreement, Intuit will provide 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’s free filing program. Consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services. Impacted consumers will automatically receive notices and a check by mail.
Intuit has also agreed to reform its deceptive 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.
Intuit withdrew from the IRS Free File program in July 2021.