TurboTax in $141 Million Pact Over Claim of Duping Taxpayers

(Bloomberg) -- TurboTax owner Intuit Inc. agreed to pay all 50 U.S. states a total of $141 million to resolve claims that the online tax preparer duped low-income Americans into paying for services that should have been free.

Under the settlement, Intuit will also suspend TurboTax's “free, free, free” advertising campaign, which lured customers with promises of cost-free tax preparation only to direct them to profitable options, New York Attorney General Letitia James, who led the states' probe, said in a statement Wednesday.

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

Kerry McLean, Intuit's general counsel, said in a blog post that the company is “clear and fair with its customers.”

“In coming to a resolution on this matter, we admitted no wrongdoing and are pleased to be able to continue our strong partnership with governments to best serve the needs of taxpayers across the country,” McLean said.

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James said her office opened the probe after the investigative group ProPublica reported that Intuit was using deceptive tactics to steer low-income consumers away from federally supported free tax services.

“Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free,” James said.

The deal comes as Intuit faces similar claims in a suit brought by the U.S. Federal Trade Commission, which accused the company of luring customers with free services and hiding the added costs in the fine print and hyperlinks. Last month, a judge said he's not likely to immediately order Intuit to stop promoting some of its tax preparation services as free, as the FTC requested.

The judge in that case ruled that the urgency required to win such an order had likely come and gone with the April 18 deadline by which most Americans were required to file their tax returns this year.

McLean said the multi-state settlement should resolve the FTC's claims.

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