Hoodwinked TurboTax Customers To Receive $141M Refund

Software maker Intuit will distribute $141 million to millions of TurboTax customers. The company agreed to return the money paid by low-income Americans who used the software that they thought was free. 

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Intuit To Refund Money ‘Unfairly Charged’ to TurboTax Customers

Intuit is the owner of TurboTax, a popular tax software used by millions of Americans. In a multi-state agreement announced Wednesday,  the company will pay $141 million in restitution to Americans. About 4.4 million low-income TurboTax customers paid for the service even as they assumed it was free. 

In addition, TurboTax also agreed to change its deceptive business practices. In particular, it will suspend advertising campaigns that promote the software as “free”. New York Attorney General Letitia James, who led the lawsuit against Intuit, announced the agreement. All 50 states and the District of Columbia earlier signed the deal.

Intuit Did Not Admit to Any Wrongdoing, But Will Pay Hoodwinked TurboTax Customers

As part of the plea deal, Intuit did not admit to any wrongdoing on its part. The company also doesn’t expect changes to impact its business. In a company statement, Intuit said they helped millions during the past decade. Kerry McLean, Intuit’s executive vice president and general counsel, said that “Intuit is clear and fair with its customers.” 

For the past eight years, McLean said that nearly 100 million TurboTax customers filed their taxes free of charge. This is “more than all other tax prep software companies combined,” McLean added. 

$141 Million Restitution To TurboTax Free Edition form 2016-2018 

Specifically, Intuit will pay restitution to around 4.4 million TurboTax customers who used the software’s free edition between 2016 and 2018. Back then, the company told customers that they had to pay for the tax filing service. 

However, these customers were actually eligible to file for free via the IRS Free File Program. TurboTax actually offered the FFP at the time. Affected TurboTax customers will receive around $30 for each year they used the software. The company will send the notices and a check by mail automatically. 

Intuit Cheated Millions of TurboTax Customers 

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” James said. “For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers,” she declared. “We’re putting millions of dollars back into the pockets of impacted Americans.”

Until recently, Intuit offered two free versions of TurboTax. One was through the IRS Free File Program. This is a public-private partnership that allows low-income Americans to file their taxes for free. However, Intuit already terminated its involvement with the FFP in July 2021. 

TurboTax Free Edition Isn’t Free For Many Users

Then, Intuit aggressively marketed another version, the TurboTax Free Edition. Despite the “free” label, only certain returns defined by Intuit are eligible for the free filing. Users with more complicated returns must upgrade to a paid version in order to successfully complete their filing. The states’ lawsuit said that these individuals actually were eligible for the IRS Free File Program. For comparison 

  For comparison, the TurboTax free edition applies to about a third of all American taxpayers. Meanwhile, 70% of taxpayers qualified to use the IRS Free File Program.

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What do you think about the judgment ordering Intuit to pay restitution to hoodwinked TurboTax customers? Also, will Intuit and other companies practicing deceptive marketing practices learn from this?

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