TurboTax To Pay $3.5M To VA Customers Over 'Deceptive' Marketing

VIRGINIA — Virginia will receive $3.5 million in restitution from Intuit, owner of TurboTax, for consumers who paid to file their federal tax returns for services that Intuit marketed as free, according to the Virginia attorney general’s office.

The restitution is a part of a multistate agreement reached with Intuit in which the company will pay $141 million to millions of consumers across the nation who were unfairly charged tax services fees, including the $3.5 million to customers in Virginia.

Intuit, the owner of TurboTax, was accused of deceiving customers into paying for tax services that were advertised as free. As part of the agreement, Intuit also must suspend TurboTax’s “free, free, free” ad campaign that attracted customers with promises of free tax preparation services.

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

“TurboTax took advantage of and deceived Virginians,” Virginia Attorney General Jason Miyares said in a statement Wednesday. “My office will continue to aggressively go after bad actors that hurt Virginia consumers, because they must be held accountable.”

Under the agreement, Intuit will provide restitution to millions of consumers who started using TurboTax’s Free Edition for tax years 2016 through 2018 but then 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.

Consumers are expected to receive a direct payment of about $30 for each year that they were deceived into paying for filing services, according to the settlement. The consumers will automatically receive notices and a check by mail.

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

Intuit has offered two free versions of TurboTax. One was through its participation in the IRS Free File Program, a public-private partnership with the Internal Revenue Service that 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 tax-prep companies by providing its own electronic tax preparation and filing services to taxpayers.

In addition, Intuit offers 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 certain advertisements, the company repeated the word “free” dozens of times in as short as 30 seconds. However, the TurboTax “freemium” product is only free for about one-third of US taxpayers. In contrast, the IRS Free File products were free for 70 percent of taxpayers.

The multistate investigation found that Intuit "engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program," according to the attorney general's office. The company used 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, according to the investigation. 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, according to the investigation.

TurboTax’s website 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, the investigation found.

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