Federal Trade Commission Prohibits Intuit From Misleading Advertising of TurboTax as Free

Background:

In 2022, Intuit, the renowned tax software provider, agreed to pay a hefty $141 million to settle allegations of misleading low-income Americans into paying for its TurboTax software when they were eligible to file their taxes for free. This settlement resulted in approximately 4.4 million taxpayers receiving payments of up to $85 from Intuit. However, Intuit’s conflicts with government regulators over its tax preparation software have been ongoing for years, leading to the recent actions taken by the Federal Trade Commission (FTC).

FTC’s Final Order:

The FTC has issued a definitive order prohibiting Intuit from advertising its TurboTax product as free when, in reality, most consumers must pay to use it. This order stems from an administrative ruling in September that prohibits Intuit from marketing a service as free unless it is genuinely free for all customers or unless the company makes it explicitly clear what percentage of taxpayers qualify for the free product.

FTC’s Findings:

The FTC’s investigation revealed that in 2020, a staggering two-thirds of total filers, amounting to millions of tax filers, were ineligible to use TurboTax’s free product. The agency deemed Intuit’s past violations as “egregious” and deemed it necessary to issue a cease-and-desist order. The FTC opinion further stated that for at least six years, Intuit engaged in deceptive advertising practices through various media channels.

Intuit’s Response:

Intuit swiftly announced its plans to appeal the FTC’s order, expressing confidence in prevailing when the matter is brought before a neutral body. The company emphasized its commitment to providing free tax preparation services and ensuring transparency with its customers. Intuit also noted that the FTC order does not impose any monetary penalties and will not significantly impact its business.

Ongoing Conflict Between Intuit and Government Regulators:

Intuit’s tax preparation software has been a contentious issue between the company and government regulators for years. In 2022, Intuit settled a lawsuit for $141 million due to allegations of misrepresenting the cost of TurboTax to low-income Americans. The settlement allowed approximately 4.4 million taxpayers to receive payments of up to $85.

Intuit’s Free Tax Preparation Claims Challenged:

The FTC’s order highlights the intense scrutiny Intuit faces regarding its claims of providing free tax preparation services. Millions of taxpayers were ineligible for TurboTax’s free product, despite Intuit’s advertising campaigns suggesting otherwise. The FTC’s ruling emphasizes the need for accurate and transparent advertising practices, especially when promoting products as free.

Impact of FTC’s Order:

The FTC’s order is expected to have a significant impact on Intuit’s advertising practices for TurboTax. The company will need to modify its marketing campaigns to ensure clarity and accuracy regarding the availability of free tax preparation services. The order serves as a reminder to businesses that misleading advertising can lead to legal consequences and damage to their reputation.

Importance of Consumer Protection:

The FTC’s actions underscore the importance of protecting consumers from deceptive advertising practices. Consumers rely on accurate information when making purchasing decisions, and misleading advertising can lead to financial losses and diminished trust in businesses. The FTC’s order sends a strong message that companies must be transparent and truthful in their advertising claims.