FTC Judge Decides Intuit's 'Free' TurboTax Ads Did Mislead Consumers

The FTC's chief administrative law judge (ALJ) ruled that Intuit, the parent company of TurboTax, "deceived consumers" and "engaged in deceptive advertising" by advertising its "Free Edition" tax filing service as free when users ultimately had to pay. The Verge reports: The ruling (PDF) includes several pages of commercials and online ads where Intuit advertised its "Free Edition" software. While the name implies that the service is, well, free, people wound up having to pay to use it -- sparking a lawsuit from the FTC and a $141 million payout to affected users. Meanwhile, Intuit's actually no-cost Free File version, which it launched in partnership with the IRS, remained exceedingly difficult to find. In 2021, Intuit exited the program after the IRS stopped letting companies hide their free filing services from search engines.

The FTC's ALJ determined that there is a "cognizant danger of a recurring violation" by Intuit and issued a cease-and-desist order that prohibits the company from "engaging in deceptive practices in the future." The ruling prevents Intuit from representing a product as free unless it actually is free for everyone to use and "clearly and conspicuously discloses any terms that would limit the offer." In a statement, Intuit called the FTC's investigation process "flawed and highly questionable," noting "Intuit already adheres to most of the advertising practices in the FTC's erroneous decision." The company adds that it has "been clear, fair, and transparent" with customers and remains "committed to free tax preparation."

Ha!!

[timeOday]

This is well-deserved.

Instead of just imposing a new rule on TurboTax, how about just solving the problem with an actual, free, official IRS website?

My po-dunk state managed to make one for state taxes. Sure it's not slick but it works perfectly fine. And it's not bait and switch.

Re:

[Anonymous Coward]

To be honest - it's the congresscritters that make the US tax code so difficult. Just like congresscritters tried to throw a wrench into Healtcare.gov (yes, the first year was tough, any word of subsequent years being problematic? Even under the dumpster fire admin?)

Just about every state, 1st world countries (and many 2nd and 3rd world ones) allow some sort of eFile.

If you use any sort of payroll provider - the Gov't already has ALL of the information it needs to do your taxes for you. They have feeds fr

Re:

[ShanghaiBill]

Computing the correct tax bracket is less than 1% of the complexity of taxes.

The other 99% is computing what your income is.

Most people just have a W-2 or maybe a few 1099s, so theirs are simple. The IRS could easily provide a site for them to file.

Others, including me, have Sched-C and K-1s that take a week of work. I don't see the IRS providing a free site for that, and I wouldn't trust them if they did.

Re:

[jonadab]

Yes, this exactly. If your income comes from a combination of regular jobs (the kind wherein your employer provides you with a W-2 form) and normal interest income (the kind wherein you get a 1099-INT), you can fill out form 1040 in under an hour a year the first time you ever do it, and in under 15 minutes a year once you have done it a few times and know what you're doing. (In particular, at some point a light bulb goes on and you realize that you can just leave most of the thing blank because it doesn'

Re:Ha!!

[Shakrai]

I'm for simplifying the Tax Code.

You say that but the rest of your comment implies that 'simplification' means 'tax cuts for the rich'

The problem with the US tax code ain't the percentages, any idiot can compute a percentage from 1 to 99, the issue is the myriad exemptions, exclusions, deductions, credits, different treatment of earned vs. unearned income, blah, blah, blah. For decades the Federal Government -- under both parties -- has used the tax code as a form of indirect social engineering and as a spoils system for the political base of whatever party is currently in power, instead of viewing it as a means to raise revenue to fund Government operations. Most taxpayers never see this, because most people only have W-2 income, and W-2 only returns can be completed in under an hour (and without paying money to Intuit or the rest of the parasitic tax preparation industry)

My tiny bit (never more than 5k) of "side hustle" 1099 income combined with a paltry amount of dividends/capital gains from my comparatively tiny (well under six digits) post-tax investment portfolio turns my annual tax return into an all day affair. I am an educated white collar professional with a zealously maintained set of books, via a PFM, and it is still a colossal pain in the ass to do my taxes. I refuse on principle to outsource the job to anyone -- especially Intuit and H&R Block, they're parasites -- who is just going to enter my numbers into a canned software program and charge me a premium for the privilege.

You know what I'd settle for? A slightly less shitty version of Free Fillable Forms [irs.gov].

You know what would make me happy? The IRS sending me a completed return for signature, like tax agencies do in nearly every other Western country, as they literally already possess all of the information they need to compute it. If I disagree with their computations I can complete my own return, as is the case in other countries, but the vast majority of taxpayers, including folks like me with more complicated than average situations, could simply sign the pre-filled return and move on with their lives.

Every time this is proposed it is killed by lobbyists for the tax preparation industry. There are some people who have situations complicated enough to need the services of a tax professional, meaning someone more capable than a data entry clerk at H&R Block, but the vast majority of people are conned by these outfits into parting with money they do not need to part with. Have I called them parasites enough times yet?

Re:

[alvinrod]

Have I called them parasites enough times yet?

No, but /.'s lameness filter would shut you down long before you reached that point, so you're forgiven.

Good old defeatism

[Rujiel]

Because no good software can originate in the public sector, right? But the moment it's in the private sector, all of its devs automagically become superhuman and perform unbelievable feats.

Re:

[Shakrai]

My po-dunk state managed to make one for state taxes. Sure it's not slick but it works perfectly fine. And it's not bait and switch.

Your po-dunk state is further along than most. I've called five different States home, have filed income taxes in seven, and none of them had anything like this. My current State, Oregon, we have our own version of Free Fillable Forms, but for some asinine reason it excludes the part-year and non-resident forms. I'm not sure why, it ain't doing any computations or logic flow for you, it's just data entry with a means to electronically submit what you input to the State. Given that I was a part-year resi

Re:

[Burdell]

My otherwise-backwards state (Alabama) manages this just fine, and the IRS is finally looking at doing the same. But the reason the IRS hasn't done it in the past is that Congress, at the behest of lobbyists from Intuit and H&R Block and such, explicitly banned the IRS from doing so. That blockade has finally been removed (although said lobbyists are still trying to get it reinstated).

I Got Caught by This

[NoMoreACs]

I used to use a Free File Service accessed through Credit Karma. Now that same path ends up funneling you into TurboTax.

"Free!", it screamed.

A few Clicks later, it was $41. Ok, I can deal...

Then, near the end, it was suddenly $140+ (!!!)

I partially blame Credit Karma for the smarmy relationship; but TT will never get anything from me, again. . .

Re:

[misexistentialist]

There is no Credit Karma to blame, it was bought by Intuit.

Re:

[Anubis IV]

CreditKarma was bought by Intuit a year or two ago, but their free filing service (formerly CreditKarma Tax) was spun off and sold to Cash App. It’s still around today as Cash App Taxes [cash.app], and even has your old records to import for future use.

Cash App for iPhone and Google Play only

[tepples]

The one drawback I've found with Cash App Taxes after the transition from Credit Karma is that the service requires a Cash App installation to sign in, and Cash App is exclusive to iPhone and Google Play phones. Users of a feature phone, AOSP phone, Librem 5, PinePhone, or Fire tablet need not apply. They say it's for 2FA but don't allow standard TOTP apps for 2FA.

Re:

[NoMoreACs]

CreditKarma was bought by Intuit a year or two ago, but their free filing service (formerly CreditKarma Tax) was spun off and sold to Cash App. It’s still around today as Cash App Taxes [cash.app], and even has your old records to import for future use.

Thanks for the tip!

Gotta plug my boys

[jacks smirking reven]

At FreeTaxUSA.com. [freetaxusa.com] An actual free filing site (if only doing basic Federal) and the paid for state and upgraded plans are clearly marked with what you get and what it costs. I usually throw them the $8 even though I don't need it because it just works, the site layout is nice, the way it walks you through the whole process is well thought out.

I am surprised Intuit hasn't purchased them yet and ruined it.

The mask slips sometimes

[Bruce66423]

This is one of those occasions when it is totally obvious who really runs the USA - and it's not the people. TurboTax needs to be charged punitive and exemplary damages - at least 3 times what they gained by deceit, and preferably 10 times.

Meanwhile the people who really run the USA will be a touch embarrassed at being outed. Sadly it won't last.

I just like the fact

[rsilvergun]

But they did ads telling people they had a free product and then charged for the product and then had the nerve to tell a judge that those ads were somehow not misleading.

Intuit is garbage

[grasshoppa]

Intuit is garbage, wrapped in slime.

Maybe I'm only saying that because I have to support quickbooks...but...I have to support quickbooks, and it's a huge pile of shit.

Re:Intuit is garbage

[echo123]

Intuit is garbage, wrapped in slime.

Yes it is! I still have scars from using Intuit Quicken, before I switched to free, open-source GnuCash. Intuit made it impossible to upload bank transactions unless the bank pays Intuit a fee, so banks in a country I am involved in aren't supported. Plus Intuit wants customers like I used to be, to purchase regular software upgrades. GnuCash allows me to upload transactions in MT940 format, supported by my bank, freeing me from the tyranny of manually entering all those stupid little transactions and trying to balance the books on a regular basis. Oh how I hate Intuit so!

Re:

[Shakrai]

How difficult was the transition from Quicken to GnuCash? Both in terms of data migration, if any, and learning curve for day to day operation.

My last experience with GnuCash is 15+ years old and calling it unfriendly to use back in those days would be an understatement. I settled on Moneydance [moneydance.com] after I fired Quicken (who I only gave a chance after Microsoft discontinued 'Money', which was and still is, IMHO, better than Quicken). It ain't free, or open source, but it is independently developed with a pr

Re:

[echo123]

I had to think about this, because the process wasn't something I wanted to remember. It wasn't a walk in the park, but with planning and effort it wasn't terrible either, and it was absolutely worth it once achieved. It's also also been a satisfying feeling to use it over the years, given the difference between GnuCash and Quicken, and how miserable manually entering foreign transactions was. GnuCash handles foreign currency transactions with ease compared to Quicken, at least back in the day.

And this is t

$141M

[StormReaver]

$141 million is all they were fined?! It would have been more appropriate if that were the fine for each year they scammed the public.

Re:

[jonadab]

> It would have been more appropriate if that were the fine for each year they scammed the public.

Well, they couldn't be fined for the usual scam ("taxes are hard, let us do them for you" [even though in practice you'll actually spend more time providing us with all the documentation we ask for, than it would take to just file the dang taxes yourself]), because that's not technically illegal, and other companies (notably H&R Block) have been doing it since Joe Biden was a little boy.

So the fine only

FTC is negligible to citizens

[Bob_Who]

Intuit called the FTC's investigation process "flawed and highly questionable,"

Intuit is right. If the FTC had any real impact on reality it would make Intuit refund everybody for false advertising.

TaxHawk

[LindleyF]

And no state income tax == free.

Lying has always been legal for Intuit

[frijolecounter]

Purchasing Quickbooks magically transforms "consumers" into "businesses", and shields Intuit from the FTC's consumer protection realm. Legally lying to millions of consumers each year for nearly a half century funded dozens of acquisitions including Turbotax. Intuit’s incredulity that lying isn't legal stems from breach of contract between Intuit and the IRS to provide free tax filings to low-income taxpayers and government employees. The initial $40mlilion fine for the initial contract breach was p