Intuit, the software company behind the popular TurboTax tax-filing program, has agreed to pay $141 million to customers it deceived into paying for tax services that were wrongfully advertised as free, New York Attorney General Letitia James announced.
Under the agreement, detailed in a press release Wednesday, the firm, based in Mountain View, California, will be forced to pay restitution to approximately 4.4 million low-income taxpayers it allegedly defrauded between the years of 2016 and 2018 and suspend TurboTax’s misleading "free, free, free" ad campaign.
The massive settlement was signed by attorneys general from all 50 states.
James' investigation into Intuit was sparked by a 2019 ProPublica report that alleged the company was steering low-income tax filers away from its free federally supported service, the "IRS Free File program," and toward its commercial product, "TurboTax Free Edition," under the guise that it was easy — and free.
But in actuality, according to the report, many users ended up paying fees, sometimes up to $200, after falling prey to intentionally implemented dark patterns — or design tricks that capitalize on Americans’ fear, uncertainty, and doubt about the tax filing process to get them to do things they wouldn't normally do.
"Intuit knows it’s deceiving its customers," the ProPublica report states, citing a company PowerPoint presentation on the results of an analysis of customer calls in 2019.
"The website lists Free, Free, Free and the customers are assuming their return will be free," the presentation said, adding, "Customers are getting upset."
James' investigation confirmed many of the details of the report.
The attorney general said Wednesday that she and her fellow AGs found the company "engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program."
Such practices included using confusingly similar names for both its actually free product and its "freemium" product, which is only free for roughly one-third of tax filers; bidding on paid search ads to direct people looking for the IRS Free File service to its TurboTax “freemium” product instead; blocking its IRS Free File landing page from search engine results during the 2019 tax filing season; and never recommending its IRS Free File program on its recommended solutions webpage, even when consumers were ineligible for the "freemium" product.
"Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to," James said in a statement. “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, and we’re putting millions of dollars back into the pockets of impacted Americans. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal."
Affected consumers will be notified by mail and can expect to receive a direct payment of approximately $30 for each year that they were deceived into paying for tax filing services.
Representatives for Intuit have yet to respond to requests for comment from major media outlets, including the Associated Press.