COLUMBIA, S.C. (WCBD)- South Carolina consumers are getting back millions of dollars after investigators say they were unfairly charged by TurboTax.
Attorney General Alan Wilson announced Wednesday that South Carolinians would get back more than $2 million as part of the $141 million multi-settlement settlement with the owner of TurboTax, Intuit Inc.
Impacted customers will receive direct payments of roughly $30 for each year they were duped into paying for filing services and automatically receives notices and checks by mail.
According to Wilson, TurboTax duped consumers into paying for tax services that should have been free by luring them in with a “free, free, free” ad campaign. They were promised free tax preparation services only to be deceived into paying for those services and now must suspend that advertisement as part of the agreement.
“TurboTax’s misleading advertising caused many South Carolinians to unnecessarily pay for tax preparation services,” Attorney General Wilson said. “I am pleased to be able to provide relief to South Carolina consumers, including members of the military, who were deceived by TurboTax’s business practices.”
The investigation into Intuit began after nonprofit newsroom ProPublica reported that the company had used deceptive digital tactics to attract low-income customers toward its commercial products and away from free federal tax services.
Intuit has previously offered two free versions of TurboTax. One was the ‘IRS Free File Program,’ a public-private partnership with the IRS which allowed taxpayers earning approximately $34,000 and military members to file for free. In exchange, the IRS agreed not to compete by providing its own electronic preparation and filing services. This service was free for about 70% of taxpayers.
The second version was called the “TurboTax Free Edition,” a “freemium” product advertised through campaigns in which “free” was the most prominent selling point. Some of these advertisements contained the word “free” dozens of times in as little as 30 seconds. Despite the name, however, the product was only actually free for about one-third of taxpayers.
The multistate investigation found that Intuit had engaged in deceptive tactics and unfair trade practices that limited taxpayers’ participation in the ‘IRS Free File Program’ by using “confusingly similar names” for both products and paid search advertisements. Through the paid search, those looking for the IRS Free File Program were directed toward the “freemium product.”
The investigation further revealed that Intuit knowingly blocked the Free File landing page from search engine results during the 2019 filing season, effectively barring eligible taxpayers from filing their returns for free.
Under the agreement, Intuit will pay out millions to customers who used TurboTax’s Free Edition for tax years 2016 through 2018 and were told they had to pay to file even if they were eligible for the ‘IRS Free File Program.’
Intuit withdrew from the IRS Free File program in July 2021.