Marylanders To Receive $2M In Restitution From TurboTax Settlement

MARYLAND — Thousands of Maryland consumers who were unfairly charged by TurboTax, Intuit Inc. will receive restitution, according to the Maryland Attorney General's Office.

Maryland Attorney General Brian E. Frosh announced Wednesday a settlement that includes more than $2 million in restitution from the owner of TurboTax, Intuit Inc., for misleading Maryland consumers into paying for tax services that they could have received for free.

In total, Intuit will pay $141 million to customers in all 50 states and the District of Columbia.

Consumers are expected to receive a direct payment of approximately $30 for each year that they were deceived into paying for filing services, the Associated Press reported. Those who are owed refunds do not need to do anything to receive restitution. They will automatically receive notices and a check by mail.

In Maryland, more than 66,000 consumers are eligible for restitution, according to Frosh.

In addition, the attorney general said Intuit must suspend TurboTax’s “free, free, free” ad campaign that lured customers with promises of free tax preparation services, only to then have them pay for services.

“TurboTax lured potential customers with promises of free tax filing services, when it knew most of those customers would not qualify for those services,” Attorney General Frosh said. “Once those customers were hooked, TurboTax and its parent company, Intuit, converted those customers to another service for a fee. We are pleased that those customers who paid for services that they should have received for free will receive restitution as part of our settlement.”

An investigation into Intuit began after ProPublica reported that the company was using deceptive digital tactics to steer low-income consumers toward its commercial products and away from federally-supported free tax services.

Until last year, Intuit offered two free versions of TurboTax. One was through its participation in the Internal Revenue Service's Free File Program, geared toward taxpayers earning roughly $34,000 and members of the military. Intuit withdrew from the program in July 2021, saying in a blog post that the company could provide more benefits without the program's limitations.

The company also offers a commercial product called “TurboTax Free Edition” that is only for taxpayers with “simple returns,” as defined by Intuit.

Frosh said a multistate investigation ultimately found that Intuit engaged in several deceptive and unfair trade practices that limited consumers’ participation in the IRS Free File Program. He said the company used confusingly similar names for both its IRS Free File product and its commercial “freemium” product. Intuit bid on paid search advertisements to direct consumers who were looking for the IRS Free File product to the TurboTax “freemium” product instead. Intuit also purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free. Moreover, TurboTax’s website included a “Products and Pricing” page that stated it would “recommend the right tax solution,” but never displayed or recommended the IRS Free File program, even when consumers were ineligible for the “freemium” product.

Under the settlement agreement, Intuit will provide restitution to millions of consumers through the U.S. who started using TurboTax’s Free Edition for tax years 2016 through 2018 and who were told that 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.

Intuit has also agreed to reform its business practices, including:

• 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; and
• 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.

“We empower our customers to take control of their financial lives, which includes being in charge of their own tax preparation,” an Intuit spokesperson told ProPublica in a statement in 2019.

The spokesperson added that a “government-run pre-filled tax preparation system that makes the tax collector (who is also the investigator, auditor and enforcer) the tax preparer is fraught with conflicts of interest.”

Consumers with concerns about a fee-based tax service transaction may contact the Maryland Attorney General’s Office by calling 410-528-8662 or 888-743-0023, email consumer@oag.state.md.us, or file a complaint online at www.marylandattorneygeneral.gov.

The Associated Press contributed to this article.