Thanks for signing up!
How the Tax Prep Industry Makes You Pay
ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.
With millions of Americans scrambling to file their taxes in the next few weeks, the Federal Trade Commission asked a federal court late Monday to intervene to stop Intuit from claiming in ads that Americans can file for “free” using the company’s TurboTax software.
The FTC began investigating TurboTax in 2019 in response to ProPublica stories describing how users had been lured into using the software with promises of free filing, only to discover later they had to pay fees to finish the process.
Subscribe to the Big Story newsletter.
Thanks for signing up. If you like our stories, mind sharing this with a friend?
For more ways to keep up, be sure to check out the rest of our newsletters.
Fact-based, independent journalism is needed now more than ever.
The complaint, filed in U.S. District Court for the Northern District of California, where Intuit is based, accuses the company of engaging in deceptive marketing for years.
It points, for example, to recent TV ads in which almost every word spoken is “free,” quoting from one featuring an auctioneer who says: “And free, and free, and free, and free, and free. Now a bidder and free! Now give me another bidder and free, and a free here and a free free free a free free free.”
The FTC charges that, “in truth, TurboTax is only free for some users, based on the tax forms they need. For many others, Intuit tells them, after they have invested time and effort gathering and inputting into TurboTax their sensitive personal and financial information to prepare their tax returns, that they cannot continue for free; they will need to upgrade to a paid TurboTax service to complete and file their taxes.”
In a blog post, Intuit said it will “vigorously challenge” the FTC’s complaint.
“The FTC’s arguments are simply not credible. Far from steering taxpayers away from free tax preparation offerings, our free advertising campaigns have led to more Americans filing their taxes for free than ever before and have been central to raising awareness of free tax prep,” Intuit General Counsel Kerry McLean wrote. The post added that over the past eight years, TurboTax has helped “nearly 100 million Americans file their taxes for free.”
Intuit lawyers defended the accuracy of the ads in a response filed Tuesday but also asserted that the company, in correspondence with the FTC just days ago, agreed to take down its “free” TV spots. The company said that “after meeting with FTC Chair Lina Khan and in the spirit of cooperation, Intuit informed the FTC on March 24, 2022, that it would voluntarily ‘pull down the ‘free, free, free’ TV ads for the remainder of the tax season’ in response to concerns that those advertisements were deceptive.”
TurboTax still markets some of its products as “free” on its website.
The FTC’s request, which seeks a temporary restraining order and a preliminary injunction to stop Intuit’s “free” tax prep marketing, comes in parallel with an internal FTC proceeding against the company. In that proceeding, an administrative complaint was filed against the company Monday under the federal law that prohibits unfair or deceptive business practices. If the administrative case does not settle, it will be heard before an in-house FTC judge.
While that potentially lengthy process unfolds, the FTC said it is asking the federal court to intervene to “put an immediate stop to Intuit’s deception well before this year’s April 18 tax filing deadline.”
The Information reported in January that the FTC under Khan was pushing forward with the Intuit investigation despite a recent Supreme Court ruling that trimmed the agency’s authority in such cases.
The materials filed in court Monday show the FTC has obtained a large volume of internal emails and other documents in its multiyear investigation of Intuit, though some sections of the complaint and hundreds of pages of accompanying exhibits are redacted.
Much of the material hinges on what the FTC frames as intentional confusion and misdirection around competing versions of TurboTax labeled “free.”
TurboTax previously maintained a heavily advertised Free Edition alongside a similarly named Free File product. The Free Edition routed some filers to a version of TurboTax that charged them a fee based on which tax forms they had to file.
Meanwhile, the Free File product, which was offered as part of a partnership with the IRS, did not route users to paid products and was truly free for anyone making less than an income threshold. But it was difficult to find. (In July, Intuit announced it was leaving the IRS partnership.)
According to the complaint, Intuit employees were particularly concerned that users would find the truly free version of TurboTax, and they brainstormed ways to stop that from happening.
Read More
The complaint quotes an Intuit employee saying in September 2018: “It sounds like we have the ability to block our [Free File] offering/landing page from organic search if we rename to TurboTax Free Edition. This sounds like a great solution if we learn that TurboTax Free File does start to outrank our commercial Free.”
A series of articles by ProPublica have shown that, for many years, Intuit and other providers have steered taxpayers who were eligible for free online tax prep toward paid options. That included heavily marketing products that were labeled “free” but were separate from the Free File program and often led users to paid offerings. In 2019, Intuit went so far as to add code to its Free File website that kept the option from turning up in results on Google and other search engines. (That code was later removed.) Intuit also used “dark patterns,” ProPublica reported, which are “design tricks to get users of its website to do things they don’t necessarily mean to do.”
The FTC also hired an expert, Yale School of Management marketing professor Nathan Novemsky, to conduct a survey of consumers to assess their perceptions of whether they could use TurboTax for free. The survey found that many respondents who weren’t eligible for free tax filing believed, incorrectly, that they could file their taxes for free with TurboTax. “TurboTax advertisements and the TurboTax website were identified as a significant source of taxpayers’ misimpressions about using TurboTax for free,” Novemsky wrote.
This story you’ve just finished was funded by our readers. We hope it inspires you to make a gift to ProPublica so that we can publish more investigations like this one that hold people in power to account and produce real change.
ProPublica is a nonprofit newsroom that produces nonpartisan, evidence-based journalism to expose injustice, corruption and wrongdoing. We were founded over 10 years ago to fill a growing hole in journalism: Newsrooms were (and still are) shrinking, and legacy funding models are failing. Deep-dive reporting like ours is slow and expensive, and investigative journalism is a luxury in many newsrooms today — but it remains as critical as ever to democracy and our civic life. More than a decade (and six Pulitzer Prizes) later, ProPublica has built one of the largest investigative newsrooms in the country. Our work has spurred reform through legislation, at the voting booth and inside our nation’s most important institutions.
Your donation today will help us ensure that we can continue this critical work. From the climate crisis, to racial justice, to wealth inequality and much more, we are busier than ever covering stories you won’t see anywhere else. Make your gift of any amount today and join the tens of thousands of ProPublicans across the country, standing up for the power of independent journalism to produce real, lasting change. Thank you.
Donate Now
Justin Elliott is a ProPublica reporter covering politics and government accountability. To securely send Justin documents or other files online, visit our SecureDrop page.
Thanks for signing up!
© Copyright 2022 Pro Publica Inc.
Creative Commons License (CC BY-NC-ND 3.0)
Thank you for your interest in republishing this story. You are free to republish it so long as you do the following:
