FTC says TurboTax free filing not as free as advertised, Intuit vows to fight

The U.S. Federal Trade Commission, in a recently filed complaint with the U.S. District Court for Northern California, accused TurboTax owner Intuit of overstating the service’s Free File option to the point where it considers such marketing a deceptive trade practice, a charge that Intuit promised to “vigorously” challenge.

The government noted in its complaint that much of TurboTax’s marketing emphasizes that people can file for free, for instance in recent commercials where nearly every word is literally “free.” The FTC said this was deceptive, as the free option only applied to a minority of customers. While the commercials have a disclaimer saying the free option is only for simple returns, the FTC did not think these were adequate due to their small size, the short amount of time they’re on the screen, and the fact that voiceovers don’t mention them. Further, it said that the definition of a “simple” return has narrowed over the years.

"In truth, TurboTax is only free for some users, based on the tax forms they need. For many others, Intuit tells them, after they have invested time and effort gathering and inputting into TurboTax their sensitive personal and financial information to prepare their tax returns, that they cannot continue for free; they will need to upgrade to a paid TurboTax service," the FTC alleged.

The complaint added that TurboTax had been available for free to use on any form via the IRS’s Free File Program, but ceased to be available last year.

Intuit, in a statement, said the claims were not credible, and that it would fight the charges. Executive vice president and general counsel Kerry McLean said in a statement that the company's advertising campaigns have grown the number of people who file for free, and have been central to raising awareness of free tax prep options.

“The FTC’s arguments are simply not credible. Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep,” said McLean. “Over the past eight years, TurboTax products have helped nearly 100 million Americans file their taxes for free, and our most recent free advertising campaign has only accelerated the use of TurboTax free offerings, driving approximately 60% growth from 11 million free filers in 2018 before the campaign launched to more than 17 million free filers in 2021.”

She also pointed out that Intuit supports free filing, as evidenced by its participation in the IRS’s Free File program. However, in 2020 the Treasury Inspector General for Tax Administration faulted the program and its participants for underpromoting this option and failing to inform people that it must be done through the IRS website. Further, the inspector general suggested that those participating in the Free File program had taken active efforts to prevent internet search engines from displaying the appropriate website allowing access to this free option. A 2020 investigation from the New York State Department of Financial Services came to a similar conclusion, accusing companies of deliberately undermining the program to steer taxpayers toward their own paid products.

McLean noted that while the FTC is currently suing Intuit, the IRS itself said the company was still in compliance with the rules of the Free File program. She lamented that it’s possible to be in compliance with one agency while still being sued by another, and said such actions will discourage other companies from partnering with the government in the future.