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Intuit, the owner of popular tax-filing software TurboTax, will pay $141 million in compensation to millions of low-income Americans who were “unfairly charged” for services that should have been free, according to a multi- States announced Wednesday.
TurboTax has also agreed to reform its business practices. For example, he must suspend a “free, free, free” ad campaign that “lured in” clients with the promise of free tax preparation but then asked them to pay, according to an ad from the New York Attorney General. Letitia James.
All 50 states and the District of Columbia signed the agreement.
Intuit will pay compensation to nearly 4.4 million consumers who used the free edition of TurboTax during tax years 2016 through 2018. These customers were told they had to pay for the service despite the fact that ‘they were eligible to file for free through the IRS Free File program offered through TurboTax, according to the announcement.
Consumers should receive about $30 for each year they paid for services, according to the announcement. Consumers will automatically receive notices and a check in the mail.
A spokesperson for Intuit did not immediately return a request for comment.
“Intuit tricked millions of low-income Americans into the free tax filing services they were entitled to,” James said in a statement. “For years, Intuit has cheated the most vulnerable among us for profit. Today, every state in the country holds Intuit accountable for defrauding millions of taxpayers, and we’re putting millions back in their pockets. Americans affected.”
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Until recently, Intuit offered two free versions of TurboTax. One was through the IRS 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. (It was available to taxpayers with incomes below about $39,000, according to an earlier Federal Trade Commission complaint.)
Intuit has aggressively marketed another version (the TurboTax Free Edition) as “free,” but it’s only free to taxpayers with “simple” returns as defined by Intuit, according to the announcement. Users without simple declaration must upgrade to a paid version of the tax service.
(For the 2021 tax year, Intuit refers to a simple statement as a statement that can be filed on a Form 1040 with limited schedules, such as one that includes student loan interest paid, according to the FTC.)
The service would be free for about a third of US taxpayers, while IRS Free File products are free for about 70%, according to the announcement.
This is a developing story. Check back for updates.