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TurboTax Isn’t Free Tax Software, FTC Hauls Intuit To Court

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Turbotax page under magnifying glass | TurboTax Isn’t Free Tax Software, FTC Hauls Intuit To Court | featured

The Federal Trade Commission (FTC) sued software maker Intuit for falsely marketing TurboTax as free tax software. However, the FTC said that Intuit actually charges most users when they actually file their income taxes.

RELATED: IRS to Stop Using Facial Recognition To Verify Taxpayers

FTC Asks Court To Stop Intuit From Marketing TurboTax As Free Tax Software

Seal of the Federal Trade Commission in downtown Washington | FTC Asks Court To Stop Intuit From Marketing TurboTax As Free Tax Software

On Monday, the FTC sued Intuit in a US District Court for the Northern District of California. The agency asked the court to immediately stop the software company from advertising free tax software.

The timing comes as American taxpayers are rushing to file their 2021 income taxes by the April 18 deadline. 

In addition, the FTC also issued a parallel administrative complaint. This will determine if Intuit’s practices violated the FTC Act, according to the lawsuit.

According to an Intuit presentation last January, around 56 million people filed their taxes using TurboTax in 2021. They filed 54 million W-2 and 40 million 1099 tax forms. 

Intuit Falsely Advertises TurboTax As Free Tax Software

Samuel Levine, FTC’s director of the Bureau of Consumer Protection, issued a written statement on the lawsuit. “TurboTax is bombarding consumers with ads for ‘free’ tax filing services,” he said.

Then, the company will hit consumers “with charges when it’s time to file. We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season.”

Intuit’s advertising says that taxpayers can file their income taxes for free via TurboTax.

However, the FTC charges that most users realize they need to pay Intuit when they’re submitting the tax forms. This is especially true for independent contractors with 1099 forms, 

Intuit Says FTC’s Charges ‘SImply Aren’t Credible”

Kerry McLean, Intuit EVP, and general counsel dismissed the FTC’s claim. He said that the agency’s arguments “simply aren’t credible” and that TurboTax is really free tax software.

In the last ten years, around 100 million Americans filed their taxes for free with TurboTax. In fact, more than 17 million taxpayers filed their taxes for free in 2021. This is six million more users compared to 2020. 

“Intuit’s free advertising campaigns led to more Americans filing their taxes for free than ever before,” McLean said.

As for the FTC complaint filed against the company, he said that Intuit will contest the charges. “We look forward to presenting the facts in court and are confident in the merits of our position,” he added.

TurboTax is Not Free Tax Software For Most Users

Meanwhile, the FTC disputes the “free tax software” advertising. The agency said that Intuit isn’t making TurboTax free for most tax filers. Only those with simple tax returns can use TurboTax for free.

Intuit alone defines the criteria for simple tax returns. And this definition changes every year. 

For example, a simple return for the tax year 2021 means taxes filed on a Form 1040 with limited attached schedules. This includes student loan interest paid.

For taxpayers that do not have a simple return, they must upgrade to a paid version of TurboTax in order to file their taxes. “In truth, TurboTax is only free for some users, based on the tax forms they need,” the FTC said.

For others, TurboTax will inform them they cannot continue for free. The software will alert users only after they have already spent time entering their personal and financial information.

According to the FTC, two-thirds of American taxpayers don’t qualify for TurboTax’s free service based on their tax returns.

IRS Free File Program

Until 2020, TurboTax was part of the Internal Revenue Service’s Free File program. Intuit allowed Americans with a gross income of less than $39,000 to file their taxes for free with TurboTax. 

Watch the WTAJ News video reporting that TurboTax opts out of IRS’s Free File program:

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