FTC Sues TurboTax For Falsely Advertising “Free” Income Tax Preparation Software

The Federal Trade Commission (FTC) recently sued Intuit, parent company of TurboTax, for falsely advertising its tax preparation software as free. The FTC is looking to bring an end to TurboTax’s misleading marketing as the April 18 deadline to file 2021 income taxes draws closer. A representative from TurboTax claims that the FTC’s arguments “simply aren’t credible,” though, according to CNBC.

Samuel Levine, director of the FTC’s Bureau of Consumer Protection, referred to TurboTax’s marketing scheme as a “bait-and-switch,” according to court documents. Levine claims that TurboTax makes tax filing software available to customers for free, but then charges users when they file their income taxes.

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The FTC acknowledges that “TurboTax is free for some users,” according to the lawsuit. However, these users only include those who file a “simple” tax return, which does not include many of the forms outside the standard Form 1040. Also, independent contractors and gig workers who receive a 1099 form cannot file “simple” tax returns. 40 million of the 56 million people who used TurboTax in 2021 filed a Form 1099, making over 70% of TurboTax users ineligible for free income tax preparation.

The FTC claims that most TurboTax users do not realize they will have to pay a fee until after they have already spent time inputting personal and financial information into the software. Kerry McClean, Executive Vice President and General Counsel at Intuit, does not specifically refute this claim by the FTC, but she does state that it is misleading.

McClean claims that TurboTax helped 17 million Americans file taxes for free in 2021, up more than 33% since 2018, when TurboTax launched its “free” income tax preparation campaign. McClean argues that TurboTax’s “free” advertising campaign has only led to more Americans filing their taxes for free. McLean did not, however, comment on the fact that more than two-thirds of TurboTax users who thought that they were using free software did not, in fact, file their taxes for free.