Some 4.4 million customers who used TurboTax will receive compensation after the company was found to have tricked consumers into paying for tax services that should have been free.
An investigation led by New York Attorney General Letitia James last year found that TurboTax—a software package for preparation of American income tax returns produced by California-headquartered Intuit—had steered millions of customers into paying for tax preparation even though they qualified for a free government program.
James, who recently filed a $250 million civil lawsuit against Donald Trump alleging widespread fraud by the former president and his company, said that the investigation was sparked by initial reporting on the case by Manhattan-based nonprofit newsroom ProPublica in 2019.
What Happened?
According to James' investigation, TurboTax attracted customers for years by pushing their "free" tax filing while steering consumers towards paying for the company's services. This happened though these consumers shouldn't have paid a dime for their tax filing using the IRS' Free File—a program that allows qualified taxpayers to prepare and file federal income tax returns online for free.
According to ProPublica, Intuit used deceptive tactics to steer low-income tax filers away from learning about the federally supported Free File in order to have them pay for TurboTax's services.
"TurboTax's predatory and deceptive marketing cheated millions of low-income Americans who were trying to fulfill their legal duties to file their taxes," James said on Thursday. "Today we are righting that wrong and putting money back into the pockets of hardworking taxpayers who should have never paid to file their taxes."
In a statement to Newsweek, Intuit said: "Intuit is pleased to have reached a resolution with the state attorneys general that will ensure the company can return our focus to providing vital services to American taxpayers today and in the future."
TurboTax's maker is also involved in an ongoing case with the Federal Trade Commission, which has sued Intuit for allegedly "deceiving consumers with bogus advertisement pitching 'free' tax filing that millions of consumers could not use."
According to the lawsuit, launched in late March 2022, some two-thirds of tax filers could not use TurboTax's free product in 2020 alone.
Intuit has not admitted to any wrongdoing, but said it voluntarily ceased broadcasting its TV ads promoting "free, free, free" services.
Who Is Eligible?
Under the $141 million settlement announced last year, 4.4 customers affected by Intuit's behavior across 50 states are eligible to receive payment ranging from $29 to $85, depending on how many years they used Turbotax.
The agreement covers the 2016, 2017, and 2018 tax years. Customers must have begun their tax returns using a TurboTax Free Edition Product but later were informed that it was not possible for them to use the product. Eligible customers must have not used the IRS Free File Product in a previous tax year.
Those eligible to be refunded will be contacted by email and will not need to file a claim.
When Will Customers Receive The Checks?
According to the New York attorney general, checks will be sent to all customers affected starting next week by mail and will be delivered through May.
Update 5/9/23, 5:30 a.m. ET: This article has been updated to include a comment from Intuit.
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Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more
