HONOLULU (KHON2) — The company behind TurboTax will pay $141 million in restitution to millions of taxpayers who were deceived into paying for free tax services, New York’s attorney general announced Wednesday. Of the $141 million, roughly $2.5 million will be used for administrative fund costs.

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” said  New York Attorney General Letitia James. “For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers.”

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Under the agreement, 4.4 million people who used TurboTax’s Free Edition for tax years 2016 through 2018 will get restitution. They were told they had to pay in order to file their taxes, even though they were eligible to file for free using the IRS Free File program offered through TurboTax. Intuit withdrew from the IRS Free File program in July 2021.

Eligible taxpayers are expected to get a direct payment of about $30 for each year that they were deceived into paying for filing services. They will automatically receive notices and a check by mail.

Hawaii’s Department of Commerce and Consumer Affairs (DCCA) told KHON2 that the restitution process is still being set up.

“The funds are to be deposited into a settlement fund by June 4 (within 30 days). Thereafter a determination will be made of covered consumers. Consumers will, then, be notified and a website and toll free number will be established.”

DCCA spokesperson

Intuit must also suspend TurboTax’s “free, free, free” ad campaign. The “TurboTax Free Edition” is only free for taxpayers with “simple returns” as defined by Intuit, and only one-third of U.S. taxpayers are eligible for this product. AG James said TurboTax has marketed this “freemium” product aggressively in recent years. In some ads, the word “free” was repeated dozens of times in under 30 seconds.

The multistate investigation revealed that Intuit engaged in several deceptive practices that limited taxpayers’ participation in the IRS Free File program, which offers free products to 70% of taxpayers. According to AG James, Intuit used similar names for both its IRS Free File product and its commercial “freemium” product. Intuit also bid on paid search ads to direct consumers to their own product.

Read the settlement below:

Intuit has also agreed to reform its business practices, including:

  • Refraining from making misrepresentations in connection with promoting or offering any online tax preparation products;
  • Enhancing disclosures in its advertising and marketing of free products;
  • Designing its products to better inform users whether they will be eligible to file their taxes for free; and
  • Refraining from requiring consumers to start their tax filing over if they exit one of Intuit’s paid products to use a free product instead.

Intuit made their own announcement on Wednesday saying, “As part of the agreement, Intuit admitted no wrongdoing, agreed to pay $141 million to put this matter behind it, and made certain commitments regarding its advertising practices. Intuit already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward.”

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All 50 states and the District of Columbia have signed onto the agreement.