The Federal Trade Commission is suing Intuit, which makes TurboTax, alleging that the company misled consumers with ads claiming free tax filing.
According to the FTC complaint, two-thirds of tax filers – which would mean millions of people — were unable to make use of TurboTax's free tax preparation option in 2020 because they did not have a "simple" tax return. Due to the COVID-19 pandemic, many businesses were forced to close, pushing millions to work at home or take on gig work. TurboTax requires users to pay additional fees to file for that type of income.
The FTC also cited Intuit’s advertising during high-profile events such as the Super Bowl, where ads can be viewed by what the agency called a significant portion of the tax-filing population.
"TurboTax is bombarding consumers with ads for ‘free’ tax filing services, and then hitting them with charges when it’s time to file,” said Samuel Levine, director of the Bureau of Consumer Protection, in a statement announcing the lawsuit. “We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”
The FTC filed the lawsuit three weeks before the filing deadline for taxes covering the 2021 tax year.
Intuit says it will fight the lawsuit. "Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep," said Intuit executive vice president Kerry McLean in a statement.
The FTC voted 3-to-1 to pursue the lawsuit, which was filed on Monday in U.S. District Court for the Northern District of California. The agency requested an immediate halt to Intuit's advertising, calling it "bogus."
Like many tax preparation services, TurboTax comes in multiple tiers, depending on the complexity of your return. Intuit says the free tier of TurboTax is aimed at filers with W-2 income and limited interest and dividend income from 1099 forms; it’s also aimed at filers claiming the standard deduction, and who are also eligible for the earned income tax credit, child tax credits and student loan interest deductions.
We reviewed TurboTax Deluxe 2021, a paid version of the program that starts at $59, as part of our round-up of the best tax software.