TurboTax agrees to pay after ‘misleading’ low income US taxpayers

The TurboTax box

Millions of Americans receiving tax rebates from the government this tax filing season can expect a cheque this year from their tax preparer as well.

Intuit, the California firm that owns TurboTax, must pay over four million people after reaching a $141m (£113m) legal settlement with all 50 states.

It comes after an investigation found the company misled low income Americans into paying to file their annual taxes.

Under the agreement, Intuit admitted”no wrongdoing”, company said.

Free services were available, but kept hidden by the company, officials say.

Americans earning below a certain threshold who used the company’s paid software to file taxes between 2016 and 2018 are now eligible to receive $30 for each year that that they filed with the company, according to a settlement announced on Wednesday.

The money will be paid to those who could have filed through the Internal Revenue Service Free File no-fee programme, but were instead steered towards the fee-charging software.

More than 4.4 million people earning less than $34,000 mistakenly used the paid programme, which was promoted through TurboTax’s “free, free, free” ad campaign, according to New York Attorney General Letitia James, who led the lawsuit.

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” Ms James said in a statement.

“For years, Intuit misled the most vulnerable among us to make a profit.”

The practices were first revealed in a ProPublica investigation in 2019, which found evidence that company executives knew they were deceiving customers through their advertising.

“The website lists Free, Free, Free and the customers are assuming their return will be free,” an internal company PowerPoint presentation said. “Customers are getting upset.”

The Silicon Valley-based company “agreed to pay $141m to put this matter behind it, and made certain commitments regarding its advertising practices”, the Intuit statement said, adding that it expects “minimal” impact on its business.

TurboTax is the largest online tax preparer in the US. Intuit is still facing legal action from the US Federal Trade Commission (FTC) over the adverts.

The company said that Wednesday’s settlement “also addresses the issues at the core of the FTC litigation, making that lawsuit entirely unnecessary.”

“Nevertheless, we are fully prepared to litigate with the FTC to prove the merits of our case.”

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