The Federal Trade Commission (FTC) is suing TurboTax’s parent company, Intuit, for claiming its tax software was free. Customers pay $60 for federal returns and $40 for most state returns after the initial free 1040EZ or 1040A version.
According to the court filing published by the FTC on March 29, “Consumers who purchase a ‘free’ product would reasonably expect that they will not need to pay additional fees when they file their taxes. When they are due, many consumers file their taxes to avoid interest and potential penalties.”
The FTC is seeking a court order prohibiting Intuit from continuing its deceptive practices. This would prevent TurboTax from “reimbursing” customers for the cost of filing their tax returns and paying appropriate refunds.
Filing for ‘Free’
The charge for Intuit has long been a point of contention for the tax preparation industry. For years the company has charged an additional $60. Typically charging $40 in most states for the federal return and $30 in a few states for state returns. This is all after the initial “free” version. The FTC’s lawsuit against Intuit is a strong step forward to ensure that consumers are protected.
The extra fees have been paid by more than half of TurboTax’s customers since Intuit purchased the tax software from its previous owner, Strategic Software. They claim Intuit has made $1 billion per year from the extra fees for national and state returns. Even though several competitors are now offering free federal and state filing services, TurboTax remains the most prevalent choice. The reality however is TurboTax is far from free.
The FTC’s Case Against Intuit
The FTC is seeking a court order prohibiting Intuit from continuing its deceptive practices. This would prevent TurboTax from advertising as “free” and stop them from “reimbursing” customers. The filing clarifies that the illegal advertising was not an isolated incident. Intuit has consistently ignored the FTC’s repeat warnings about its misappropriation of consumers’ trust and they’ve violated a variety of federal consumer protection laws. In addition to the $350,000 in consumer redress, the FTC will seek a court order barring Intuit from its unlawful practices.
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