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FTC sues TurboTax owner Intuit for advertising tax software as free

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On Monday, the Federal Trade Commission sued Intuit before a federal court. They claim that Intuit has been deceiving customers for many years through its TurboTax software which is free to use and then charges most users when filing their income taxes.

According to Inuit shareholders, TurboTax has processed taxes for 56 million taxpayers in 2021. presentationIn January. The company stated that these individuals submitted 54 million W-2 tax forms and 40,000,000 1099 tax forms.

Intuit was sued in U.S. District Court, Northern District of California by FTC. They asked for an immediate halt of its fraudulent advertising while taxpayers race to meet April 18 deadline to submit their 2021 income tax returns.

A parallel administrative complaint was also filed by the agency on Monday. The lawsuit stated that the proceeding would determine whether Intuit violated the FTC Act.

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Intuit advertises that they offer free TurboTax online filing for income taxes. But this does not apply to most people, even independent contractors who are part of the gig economy and receive a 1099 tax form.

TurboTax bombards consumers with advertisements offering ‘free’ filing, then hits them with fees when it comes time to file,” Samuel Levine from the FTC Bureau of Consumer Protection stated in writing. We are asking the court to stop this bait-and switch and protect taxpayers during peak filing season.

Kerry McLean was Intuit’s executive vice president and general attorney. He said that the arguments of Intuit “imply don’t seem credible.”

McLean reported that TurboTax had filed taxes for almost 100 million Americans in just eight years. McLean stated that 17 million more taxpayers were able to file taxes free of charge in the most recent advertisement campaign by TurboTax, compared with 11 million before 2018. 

McLean stated in writing that McLean did not intend to steer taxpayers away free tax preparation services. Instead, McLean claimed that free advertising campaigns had led more Americans to file their taxes free of charge and helped raise awareness about free tax prep.

McLean said, “While we are disappointed that the FTC has chosen to file this suit,” McLean continued.

How to file for “free”

TurboTax users who have an “simple tax return” as described by Intuit can file their taxes without charge, according to the FTC complaint.

This definition is subject to change year-to-year. For tax-year 2021 Intuit defines a simple return to be one that can file on Form 1040 with limited attachments such as student-loan interests paid.

The FTC stated that users who do not have a simple tax return need to upgrade to the paid version.

Intuit claimed that TurboTax did not comply with IRS regulations in the legal complaint.

McLean explained that Intuit did not comply with regulations from one agency and was being targeted by the other. This is a clear disconnect. The FTC’s actions will make it less attractive for companies to form public-private partnership agreements with government agencies that are beneficial to consumers.

A spokesperson for the FTC declined to comment on the statement. A spokesperson for the IRS was not available to comment at press time.

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