The Federal Trade Commission sued Intuit in federal court on Monday, alleging that it cheated customers for years by promoting TurboTax software for free and then charging most users when they pay income taxes. About 56 million people submitted their taxes to TurboTax in 2021, according to a presentation by Inuit shareholders in January. These individuals filed 54 million W-2 tax forms and 40 million 1099, the company said. The FTC has sued Intuit in the U.S. District Court for the Northern District of California, seeking immediate cessation of its “fake” advertising as taxpayers rush to meet the April 18 deadline to file income tax on the 21st. The agency also issued a parallel administrative complaint Monday. This process will determine if Intuit’s behavior violated the FTC, the lawsuit said. More from Personal Finance: Biden’s budget proposes tax increase for married people making over $ 450,000 There is still time for IRA contributions in 2021 The House is about to pass a bill to improve the pension system Much of Intuit’s advertising tells consumers that they can file their income taxes for free online using TurboTax, but that does not apply to most users, including independent concert economists who receive the 1099 tax form, the FTC said. “TurboTax is bombarding consumers with ads for ‘tax-free’ tax filing services and then charging them when it’s time to apply,” said Samuel Levine, director of the FTC’s Office of Consumer Protection, in a written statement. “We ask the court to stop this bait immediately and to protect the taxpayers at the peak of the application period.” Kerry McLean, executive vice president and general adviser to Intuit, said the agency’s arguments were “simply not credible”. Nearly 100 million Americans have filed their taxes for free on TurboTax for the past eight years, McLean said. The company’s latest advertising campaign has led more than 17 million taxpayers to apply for free in 2021, up from 11 million in 2018 before the campaign begins, McLean added. “Rather than removing taxpayers from free tax preparation offers, our free advertising campaigns have led more Americans to file their taxes for free than ever before and have been central to raising awareness about free tax preparation,” McLean told statement. “While it is disappointing that the FTC has chosen to file this lawsuit, we look forward to presenting the facts in court and are confident in the value of our position,” McLean added.
Submit “free”
TurboTax users can file their taxes for free if they have a “simple” tax return, as defined by Intuit, according to the FTC complaint. This definition changes from year to year. for fiscal year 2021, Intuit refers to a simple return as a return that can be submitted on Form 1040 with limited attachments, such as one that includes student loan interest paid, the FTC said. Non-refundable users must upgrade to a paid version of the tax service, the FTC has argued. “In fact, TurboTax is only free for some users, based on the tax forms they need,” according to the FTC lawsuit. “For many others, Intuit tells them, having invested time and effort in collecting and entering their sensitive personal and financial information into TurboTax to prepare their tax returns, that they can not continue for free.” About two-thirds of U.S. taxpayers are not eligible to file their taxes using the free TurboTax service, according to the FTC. Until last year, TurboTax was a member of the IRS Free File program, a public-private partnership created in 2002 that allows low-income Americans to file their taxes online for free. TurboTax made this service available to taxpayers with adjusted gross income of $ 39,000 or less, according to the FTC complaint. The limit was higher for active members of the army. The legal complaint does not acknowledge that TurboTax complied with IRS requirements, Intuit said. “The fact that Intuit complied with the rules and regulations of one government agency but is now being targeted by another demonstrates a significant disconnect,” McLean said. “With the FTC in action, companies will be much less willing to enter into public-private partnerships with government that benefit consumers.” An FTC spokesman declined to comment on the company’s statement. An IRS spokesman could not be reached for comment.
