TurboTax Settlement FAQs

1. Background

2. What is the IRS Free File Program?

3. What is the settlement about?

4. How much will Intuit pay under the settlement?

5. Who is eligible to reveive money from the settlement?

6. How will the consumer receive the money from the settlement?

7. Do I need to do anything to qualify for the settlement?

8. Who should consumers contact if they believe they should receive money from the settlement?

9. What types of conduct reforms is Intuit required to make?

    In April, 2019, ProPublica published "Here's How TurboTax Just Tricked You Into Paying to File Your Taxes", alleging that Intuit Inc. (Intuit), the maker of TurboTax, tricked taxpayers who were eligible to file their taxes for free to pay Intuit to do so. After the publication, the New York State Attorney General’s office, along with several other states, investigated the allegations of misconduct outlined in the article. The investigation led to an Assurance of Voluntary Compliance between all fifty states and the District of Columbia and Intuit for deceiving millions of low- and middle-income Americans into paying for tax services that should have been free.

The IRS Free File Program is a public-private partnership between the United States Internal Revenue Service (IRS) and several tax preparation companies in an organization known as the Free File Alliance. Through the Free File Program, the companies agreed to provide online tax preparation and filing services for free to taxpayers who met certain requirements (for Intuit, an adjusted gross income below a threshold of about $34,000, with the threshold being about $66,000 for active duty military service members). In exchange, the IRS agreed not to compete with these companies by providing its own electronic tax filing service. As of October 2021, Intuit no longer participates in the IRS Free File Program.

The multistate investigation found that Intuit misled consumers, causing confusion between the version of TurboTax that Intuit provided as part of the IRS Free File Program and a separate commercial version of TurboTax that Intuit marketed as free. That commercial product, called TurboTax Free Edition, only allowed consumers to file their taxes for free if they had a “simple” tax returns, as defined by Intuit. Other consumers were required to upgrade to a paid product. This is known as a “freemium” business model.

The investigation concluded that Intuit engaged in a variety of deceptive and unfair practices to lure taxpayers to its commercial “freemium” products. The following is a summary of some of these practices:

  • Intuit made it difficult for taxpayers to find its TurboTax Free File product by blocking its webpage from appearing in internet search results during the 2019 tax filing season.
  • Intuit bought ads that directed consumers to the freemium version of TurboTax even for search terms associated with the IRS Free File Program (for example, “free file IRS”).
  • Intuit ran a series of commercials in which “free” was essentially the only word spoken. The advertisements falsely conveyed that consumers could use TurboTax for free, when in fact most consumers were not eligible to file for free.
  • TurboTax had a “Products and Pricing” page that told consumers it would “recommend the right tax solution.” But it never displayed or recommended the TurboTax Free File product, even when consumers were eligible to use it to file for free. Many consumers were told that they were ineligible to file their taxes for free using TurboTax when, in fact, they could have filed their taxes for free using the TurboTax Free File product.

Intuit has agreed to pay $141 million. This money will be distributed to consumers as restitution, except for approximately $2.5 million in administration costs.

Consumers are eligible to receive money from the settlement if, during tax years 2016, 2017 or 2018:

  • The consumer met the eligibility requirements of the IRS Free File Program (for example, he or she had an adjusted gross income below a threshold of about $34,000);
  • The consumer began preparing his or her tax returns in the commercial freemium version of TurboTax (TurboTax Free Edition); and
  • The consumer was required to upgrade and paid to file their taxes with TurboTax instead of filing for free.

Consumers who used the IRS Free File Program in a previous tax year are not eligible for restitution under the settlement. This summary is provided for informational purposes only. Restitution will be governed by the terms of the settlement agreement.

Restitution will be distributed to eligible consumers automatically by a professional third-party fund administrator. Consumers will not have to submit a claim to receive restitution. A web site will be created with more information and contact information for the administrator.

No. Unlike other settlements that require consumers to file claims, there is no claims process for this settlement. If you are eligible to receive a payment, you will be contacted automatically by the fund administrator.

Under the settlement, restitution will automatically be paid to consumers that meet the criteria outlined above in the answer to question 5. Unlike other settlements that require consumers to file claims, there is no claims process for this settlement. If you are eligible to receive a payment, you will be contacted automatically.

The states are in the process of retaining a professional third-party fund administrator that will create a public website about the settlement. The website will give consumers the opportunity to contact the fund administrator with any questions. This FAQ will be updated when the website is created. Eligible consumers will also be contacted automatically.

Under the settlement agreement, Intuit will be required to change many of its marketing and business practices going forward. The following is a summary of some of the changes:

  • Intuit must not mispresent the cost of its products and services and must disclose any material limitations of products and services that are marketed as “free.”
  • Intuit is prohibited from continuing its “Free, Free, Free” ad campaign. And if Intuit markets its tax-preparation products as free in the future, Intuit must disclose clearly and conspicuously that (a) not all taxpayers qualify to use the free product and (b) the requirements to use the free product.
  • Intuit must design its TurboTax products to inform consumers, at the earliest point possible, whether they will be able to file their taxes for free.
  • In July 2021, Intuit announced that they will no longer be a partner of the IRS Free File Program. Due to this, Intuit is prohibited from re-entering the IRS Free File Program.