FTC: TurboTax maker deceived customers with ‘free’ services

The Federal Trade Commission (FTC) ruled Monday that the maker of TurboTax is deceiving customers when it claims a version of its online tax filing software is free, when most customers would have to pay for it.

The FTC’s opinion states that Intuit’s TurboTax Free Edition, marketed as a stripped-down version of its paid software meant for customers with simple returns, isn’t as free as the company claims.

“Respondent’s claims of free filing are false for roughly two-thirds of U.S. taxpayers, who do not meet Intuit’s simple tax return qualifications and are therefore ineligible to file for free with TurboTax,” according to the opinion.

Customers who run small businesses, work as independent contractors or make over a certain income threshold can not use the company’s free service, a distinction that is not clearly established in advertising, the FTC said.

It claims Intuit ran a “broad, enduring, and willful” deceptive marketing campaign aimed at drawing in customers with promises of free tax filing and then pushing them to paid services.

The opinion orders the company to remove the misleading claims from its advertising materials and better disclose the true costs of its tax preparation services.

FTC Consumer Protection Director Samuel Levine called the opinion a “major win for consumers.”

“As the Commission has long understood, ‘free’ is a powerful lure, one that Intuit deployed in scores of ads,” Levine said. “Its attempts to qualify its ‘free’ claim were ineffective and often inconspicuous.”

“The order also sends a message across industry – ‘free’ means free – not ‘free for a few’ or ‘free for some,’” he continued. “Businesses can expect an FTC enforcement action if they harness the power of ‘free’ in the dishonest way Intuit did.”

Intuit denounced the FTC opinion, accusing the body of bias.

“This decision is the result of a biased and broken system where the Commission serves as accuser, judge, jury, and then appellate judge all in the same case,” spokesperson Derrick Plummer said in a statement to The Hill.

“Intuit has appealed this deeply flawed decision, and we believe that when the matter ultimately returns to a neutral body Intuit will prevail,” he said.

The FTC order comes as the IRS nears a roll-out of its long-awaited free tax-filing service. More than a dozen states will allow certain taxpayers to use a first-of-its-kind tax preparation and filing service developed by the IRS for the 2024 tax season.

Treasury Secretary Janet Yellen bragged about an “impressive” demo of the free IRS service Friday. 

—Updated at 6 p.m.