Virginia TurboTax customers are set to get about $3.5 million in a settlement of the lawsuit, which said that the tax service provider deceived some consumers into paying for services despite ads saying tax services were free.

“TurboTax took advantage of and deceived Virginians. I’m proud of the role my office played to secure substantial relief for the Virginia consumers that TurboTax misled. My office will continue to aggressively go after bad actors that hurt Virginia consumers, because they must be held accountable,” Attorney General Jason Miyares said in a Wednesday announcement.

In total across 50 states and Washington, D.C., Intuit will pay $141 million in restitution. That’s the result of a lawsuit launched after 2019 reporting by ProPublica that described the company’s efforts to resist the creation of a free government-run tax filing system, according to Miyares’ press release.

“Under the terms of an agreement with the federal government, Intuit and other commercial tax prep companies promised to provide free online filing to tens of millions of lower-income taxpayers. In exchange, the IRS pledged not to create a government-run system,” ProPublica reported, adding that some TurboTax programs pushed customers into paying, although they had been attracted by advertising highlighting “free” services.

After the reporting, attorneys general led by New York Attorney General Letitia James filed the lawsuit.

Miyares’ press release states that Intuit did offer two free programs, including through the IRS Free File Program, which was free for about 70 percent of taxpayers.

“Intuit offers a commercial product called ‘TurboTax Free Edition,’ which is only free for taxpayers with ‘simple returns’ as defined by Intuit. In recent years, TurboTax has marketed this ‘freemium’ product aggressively, including through ad campaigns where ‘free’ is the most prominent or sometimes the only selling point. In some ads, the company repeated the word ‘free’ dozens of times in as short as 30 seconds. However, the TurboTax ‘freemium’ product is only free for approximately one-third of U.S. taxpayers,” the press release states.

Under the terms of the settlement, Intuit is required to improve disclosures in its marketing of free products, better inform users of whether they are eligible to file for free, and not require customers to start the filing over if they exit a paid product for a free one.

In a release announcing the settlement, Intuit said the company is admitting no wrongdoing.

“Intuit is pleased to have reached a resolution with the state attorneys general that will ensure the company can return our focus to providing vital services to American taxpayers today and in the future,” Intuit Executive Vice President and General Counsel Kerry McLean said. “Intuit is clear and fair with its customers, including with the nearly 100 million Americans who filed their taxes free of charge with our products over the last eight years — more than all other tax prep software companies combined.”

That doesn’t end Intuit’s legal trouble over its marketing. In March, the Federal Trade Commission sued the company over ads that suggest that TurboTax is free.

“Intuit has engaged in, and is engaging in, deceptive business practices in the advertising, marketing, distribution, and sale of TurboTax,” the FTC argues in the lawsuit.

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Eric Burk is a reporter at The Virginia Star and The Star News Network.  Email tips to [email protected].
Photo “Turbotax Building” by Coolcaesar. CC BY-SA 3.0.