IL gets $4M from TurboTax ‘free file’ settlement. Here’s who qualifies for a payment
If you’re one of the Illinois consumers who were tricked into paying for tax services from Intuit, you may qualify for a payout from a $141 million settlement between all 50 states and the owner of tax software TurboTax.
Illinois Attorney General Kwame Raoul announced Wednesday more than $4 million will be made available as relief to deceived Illinoisans, a news release said.
“Intuit attracted customers to TurboTax with promises of free tax preparation services, leaving people to learn the hard way that those services were anything but free,” Raoul said in the release. “This settlement holds Intuit accountable for intentionally deceiving taxpayers who were simply seeking an affordable option to help them navigate what can be the daunting process of filing their taxes.”
So how do you qualify for a settlement payment and how much can you potentially get? Read on for answers to these questions and others.
Why is Intuit paying $141 million to settle deceptive TurboTax claims?
According to the release from the attorney general’s office, states across the country banded together to open an investigation, spurred by an investigative report by ProPublica, after reports surfaced Intuit was steering its low-income consumers toward its commercial products and away from federally supported, taxpayer-backed free filing services.
Intuit has offered two free versions of its TurboTax software. The first version, offered through the IRS Free File program, allows taxpayers earning up to $34,000 and military service members to file their taxes for free, according to the attorney general’s office release.
As a condition for participating in the program, the IRS agreed not to compete with Intuit and other tax preparation companies by providing its own filing service to taxpayers.
Along with the TurboTax Free File version through the IRS, Intuit also offers TurboTax Free Edition. This retail product is free to use, but only for those filers who have “simple returns,” as determined by Intuit.
Despite aggressively marketing its TurboTax Free Edition as “free,” only about one third of U.S. taxpayers actually qualified to get it at no cost. Compare that to the IRS version, which was free for 70% of taxpayers.
Ultimately, the states’ investigation found Intuit was using several shady practices to limit consumers’ participation in the more accessible IRS Free File program, the release said.
The company used confusingly similar names for both products. It paid for search result advertisements to divert taxpayers away from the IRS Free File product to the paid version instead and Intuit pulled its IRS Free File landing page from search engine results during the 2019 filing season.
The TurboTax website also included a “products and pricing” page that stated it would “recommend the right tax solution” for the user. But the page never displayed nor recommended the IRS Free File program, even when consumers didn’t qualify for its “freemium” product, the release said.
As a result, Intuit agreed to pay restitution to millions of consumers who started using TurboTax’s Free Edition for tax years 2016 through 2018 and were told they had to pay to file even though they were eligible to file for free using the version of TurboTax offered as part of the IRS Free File Program.
How do I know if I qualify to receive a settlement payment?
According to the attorney general’s office, Illinois consumers should receive a direct payment of about $30 for each year they were cheated into paying for filing services.
Affected consumers will automatically receive notices and a check by mail, the release said.
As for Intuit, it’s agreed to reform other aspects of its business dealings, including:
Halting its TurboTax “free, free, free” ad campaign
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.
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 pulled its IRS Free File program with little fanfare in July 2021, instead linking to free file options through the IRS and its own paid products.
This story was originally published May 5, 2022 at 12:44 PM.