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The Federal Trade Commission (FTC) has sued Intuit, claiming that its tax filing service TurboTax purposefully misleads users into thinking the service is free.
According to the FTC, TurboTax primarily advertises its free services to consumers around the country, with two-thirds of tax filers opting not to purchase one of their premium options in 2020. However, the lawsuit claims that the service unfairly taxes gig workers and independent contractors to file their taxes.
The FTC had previously filed a complaint against the company through the U.S. District Court in the Northern District of California. However, the organization announced on Tuesday that this complaint will be moving forward as a lawsuit that could affect millions of taxpayers. It specifically cited advertisements for the service that focuses on how it is supposedly free as being intentionally misleading.
"In spite of this advertising, many consumers who took the time to gather their documents, entrust their personal information to Intuit, and begin the filing process found that they could not file their taxes for free," the FTC said.
"TurboTax is bombarding consumers with ads for 'free' tax filing services, and then hitting them with charges when it's time to file," said Bureau of Consumer Protection Director Samuel Levine. "We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season."
When asked about the lawsuit, an Intuit spokesperson directed Newsweek to a statement made by the company regarding the original complaint. In the statement, Intuit called the allegations made by the FTC false and said that the service is in full compliance with IRS tax filing requirements.
"The FTC's arguments are simply not credible. 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 and general counsel Kerry McLean.
The FTC voted 3 to 1 in favor of filing the lawsuit, with it being filed in the same court as their previous complaint, the Associated Press reported. The lawsuit is the latest legal problem for Intuit in connection with its TurboTax services. In May 2019, Los Angeles City Attorney Mike Feuer filed a consumer protection lawsuit against Intuit for misleading customers, with a similar suit being filed by Santa Clara County in September of that year.
"Through predatory and deceptive actions, Intuit has made hundreds of millions of dollars in unfair profits on the backs of California taxpayers," said Santa Clara County Counsel James Williams in a September 2019 press release announcing the suit. "This includes low-income families who paid Intuit for services that Intuit promised the IRS and the public it would offer for free.
"Many of the customers who were harmed by Intuit's actions are vulnerable Santa Clara County residents struggling to make ends meet," he continued. "We are suing to make sure Intuit cannot make profits by engaging in deception and lies targeting middle- and low-income families."
Update 03/29/22, 3:45 p.m. ET: This article was updated with additional information.
Update 03/29/22, 3:20 p.m. ET: This article was updated with additional information.
