Enlarge / TurboTax products on display at Costco on January 28, 2016 in Foster City, California.
Getty Images | Kimberly White
The Federal Trade Commission on Monday sued Intuit for misleadingly advertising “free” TurboTax filing. Intuit’s deceptive tactics pushed customers toward paid products — even in cases where they were eligible for the free Free File program for low- and middle-income people, the FTC said.
The FTC asked a judge to issue an injunction and an injunction to compel Intuit to stop “promoting the misleading claim that consumers can file their taxes for free with TurboTax, when in truth the defendant is the defendant in numerous cases.” Consumers are not allowed to file their taxes for free with TurboTax.” If approved by the court, a proposed order presented by the FTC would force Intuit to either drop claims that its product is free or prominently include any restrictions in advertisements to “not allow a reasonable likelihood that the terms of the offer could be misunderstood.”
The FTC said Intuit makes misleading claims about TurboTax in paid ads and on its website. “Much of Intuit’s advertising for TurboTax conveys the message that consumers can file their taxes for free with TurboTax, even going as far as airing commercials in which nearly every word spoken is the word ‘free,'” said the FTC in its complaint filed in the US District Court for the Northern District of California. Intuit said it will fight the lawsuit in a response calling the FTC’s claims inaccurate.
Intuit commercials cited by the FTC include one in which an auctioneer repeatedly says “free,” another in which a court stenographer recorded a court proceeding in which “free” was the only word used, and another in which a practice instructor sings ‘free’ while conducting a group practice session,” the FTC said.
“Several ads repeat the word ‘free’ over 40 times in a 30-second ad,” the FTC said. The FTC’s emergency motion ordered the court to “immediately cease defendant Intuit Inc.’s misleading advertising of TurboTax.”
FTC: Disclaimer in fine print insufficient
The disclaimer in the fine print at the end of the commercials informs viewers “that the offer is limited to consumers with ‘simple tax returns’ or ‘simple US returns’ file their taxes for free with TurboTax.” The disclaimers are “disproportionately small “, only appear for a few seconds and are “often in [a] Font color similar to background color and will not be read by a voiceover.”
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Intuit has repeatedly changed its definition of “simple tax returns” in recent years, the FTC said. The latest definition is “a statement that may be filed on a Form 1040 with limited timetables attached to cover a number of different tax situations, including student loan interest paid.”
The FTC said the freemium version of TurboTax barred people from filing certain types of 1099 forms, regardless of their income. Consumers who are not eligible include those “who receive income from independent contractors or small businesses, such as B. Consumers working in the gig economy, for example by providing ridesharing or delivering groceries,” the FTC said.
Intuit: FTC arguments ‘just not credible’
Kerry McLean, Intuit’s Executive Vice President and General Counsel, said, “The FTC’s arguments simply lack credibility. Far from turning taxpayers away from free tax prep offers, our free advertising campaigns have resulted in more Americans filing their taxes for free than ever before and have become central to raising awareness of free tax prep.”
McLean said TurboTax has helped nearly 100 million Americans file free taxes over the past eight years, and its recent advertising campaign has “growed about 60 percent from 11 million free claimants in 2018 before the campaign launched to more than 17 million.” free applicants in 2021 effects .”
“Hard Stops” on the TurboTax website
The FTC lawsuit says taxpayers searching TurboTax’s website for a free tax return encounter various “hard stops” urging them to upgrade to versions that cost $59 or $119 for federal tax returns. (TurboTax charges an additional fee for state tax returns.) The complaint also states:
Intuit’s deceptive door opener ads described above bring consumers to the TurboTax website which depicts consumers can file their taxes for free using TurboTax, but there many consumers see screens informing them that they are not filing their taxes for free and can submit. In the case of the hard-stop screens, this confrontation comes after consumers have already created a TurboTax account and spent significant time entering sensitive personal and financial information into Intuit’s interface.
Customers are prompted “based on certain types of income, such as [or] when searching for a specific tax credit or deduction,” the FTC said. After customers encounter a “Hard Stop” screen, “they must later pay for the updated version of TurboTax, either by providing payment information or agreeing to one additional fee for using their tax refund after their returns are prepared and ready for filing.”