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Turbo Tax appears on devices on February 22, 2018 in San Francisco, California.
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The Federal Trade Commission ruled Monday in a final order and opinion that TurboTax, the popular tax filing software, engages in misleading advertising and prohibited the company from advertising its services unless they are free to all customers.
By displaying ads for “free” tax services for which many customers did not qualify, the tax filing software violated the FTC Act and deceived consumers, the agency said.
The FTC initially sued Intuit, the owner of TurboTax. for its misleading advertising in 2022. The FTC staff claimed most taxpayers could not use the company's “free” services – “such as those who receive a 1099 form for working in the gig economy, or those who earn agricultural income”. TurboTax advertised its products as free and misled these customers. according to the FTC.
FTC Administrative Law Judge D. Michael Chappell announced the initial decision in September, which the commission confirmed on Monday. Intuit appealed the case to the FTC.
In a statement Monday, Intuit said it had appealed “this deeply flawed decision.” to a federal court outside the FTC.
“Absolutely no one should be surprised that FTC Commissioners – employees of the FTC – have ruled in favor of the FTC, as they have in every appeal in the last two decades. “This decision is the result of a biased and broken system in which the commission serves as prosecutor, judge, jury and then appellate judge in the same case,” an Intuit spokesperson said.
Intuit may not advertise or market any goods or services as free unless they are free to all customers, the FTC ruled.
It could also be clearly disclosed what percentage of customers actually qualify for the free service, something close to the advertised “free” claim, the commission said. The FTC added that TurboTax could claim this even if the service is not actually free for the majority of consumers.
The FTC required Intuit to “clearly and conspicuously disclose all terms, conditions, and obligations necessary to receive the 'free' good or service.”
“The order also prohibits Intuit from misrepresenting material facts about its products or services, such as: “Such as the price, refund policies, or consumers’ ability to claim a tax credit or deduction or accurately file their taxes online without using TurboTax’s paid service,” the FTC said in the press release.
Last May, about 4.4 million people were scheduled to receive checks from TurboTax following a 50-state settlement with parent company Intuit over allegations that the company deprived millions of low-income Americans of free tax filing services.
The investigation was then opened a 2019 ProPublica report that accused the company of diverting eligible customers from government-backed tax filing products by making them hard to find in web searches — and instead pointing them to the company's paid version of the company's tax filing services.
Most customers receive about $30, with some customers who have used TurboTax three years in a row receiving up to $85. A website has also been set up for further information.
“TurboTax’s predatory and deceptive marketing defrauded millions of low-income Americans trying to comply with their legal tax filing obligations,” New York Attorney General Letitia James said in a May 4, 2023 press release. “Today we are righting this wrong and putting money behind it back into the pockets of hard-working taxpayers who should never have paid to file their taxes.”
CNN's Jordan Valinsky contributed to this report.