TurboTax may be some of the best tax software, but its parent company Intuit has agreed to pay $141 million to customers who were eligible to use the free version of the software, only to be duped into paying for the premium version.
The payout, which will give as much as $90 each to roughly 4.4 million people who purchased TurboTax between 2016 and 2018, was the result of a settlement between Intuit and all 50 states and the District of Columbia.
Under the terms of the settlement, Intuit admitted no wrongdoing, but will have to clarify its fees going forward and stop marketing TurboTax in its “free free free” ad campaign. The company will also have to better inform users whether they will be eligible to file their taxes for free, and refrain from requiring consumers to start their tax filing over if they exit one of Intuit’s paid products to use a free product instead.
Prior to 2021, Intuit was part of the government’s Free File program, which allows individuals with an adjusted gross income of less than a certain amount to file their taxes for free. In 2018, the limit for TurboTax was $34,000; in 2021, that limit was $39,000, though the IRS stipulates that anyone making up to $73,000 can use the Free File program.
The multistate investigation, prompted by a ProPublica report in 2019, was led by New York Attorney General Letitia James.
At the time, Intuit offered two free versions of TurboTax. The first was the version offered through the Free File program and covered 70% of taxpayers; the other, called TurboTax Free Edition, was a “freemium” product and only free for 30% of taxpayers.
According to a statement by the NY Attorney Generals Office, Intuit “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.” The statement also said that TurboTax’s website “never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.”
As many as 465,000 customers in Texas, 371,000 in California, 335,000 in Florida, and 176,000 in New York are eligible to receive payments, according to the settlement.
Are you eligible?
How and when the settlement will be paid out is a bit nebulous; as per the agreement, an Oversight Committee will determine who’s eligible, and how the funds will be dispersed. Intuit has 60 days to submit a plan of action.
Consumers who are eligible will be notified by mail or email, and can opt to receive a physical check or an electronic payment via Venmo, Paypal or Zelle. A website will also be set up along with a toll-free number.
If you made less than $34,000 to $39,000 between 2016 and 2018, and used one of TurboTax’s paid tax-filing services, you may be eligible for a refund, so stay on the lookout for an email or letter in the next few months.
George is Digismak’s reported cum editor with 13 years of experience in Journalism