Millions of American taxpayers who were eligible for free tax services but were misled into paying TurboTax will soon receive settlement checks as compensation. In a settlement reached last year, Intuit Inc., the owner of TurboTax, was ordered to pay $141 million to approximately 4.4 million individuals nationwide. These individuals, who were low-income consumers qualifying for free federally-supported tax services, were charged by TurboTax to file their federal tax returns for the years 2016, 2017, and 2018 due to deceptive and predatory marketing practices, according to New York Attorney General Letitia James.
The settlement, signed by all 50 states and the District of Columbia in May 2022, was led by Attorney General Letitia James. The affected consumers eligible for restitution payments do not need to file a claim as the New York Attorney General's Office stated on Thursday. They will be notified by email from Rust Consulting, the settlement fund administrator, and will automatically receive a check.
The mailing of checks will commence next week and continue throughout the month of May. The amount each eligible consumer receives will range from $29 to $85, depending on the number of tax years they qualify for.
New York Attorney General Letitia James emphasized that TurboTax's deceptive marketing tactics cheated millions of low-income Americans who were simply trying to fulfill their legal tax obligations. She stated that the settlement is aimed at rectifying this wrongdoing and returning money to hardworking taxpayers who should have never been charged for filing their taxes.
The investigation into Intuit was initiated by Attorney General Letitia James following a 2019 report by ProPublica, which revealed that the company employed deceptive strategies to steer low-income taxpayers away from the free federal tax services they were entitled to and towards TurboTax's paid products instead.
As part of the settlement, Intuit agreed to halt TurboTax's "free, free, free" advertising campaign. Internal documents obtained by ProPublica indicated that the company was aware of the impact of advertising free services that were not actually free for everyone, causing dissatisfaction among customers.
When contacted by The Associated Press, Intuit referred to their statement from May 2022, expressing their satisfaction with the resolution and their commitment to providing essential services to American taxpayers.
Here are the key points to know about the TurboTax settlement:
Eligibility: Approximately 4.4 million consumers across the United States qualify for the settlement payment. Eligible individuals are TurboTax customers who used the product for their tax returns in the 2016, 2017, or 2018 tax years and were also eligible to use an Intuit IRS Free File Product. They must have started their tax returns using TurboTax Free Edition but were later informed that they did not qualify, leading them to pay for a TurboTax product. Consumers who have not used the IRS Free File Product in a previous tax year are also eligible.
Receipt of Settlement Check: Eligible individuals do not need to take any action to receive their settlement check. They will receive an email from the settlement fund administrator informing them of the approximate amount they will receive. Payments will be sent out during May.
Settlement Amount: The payment amount is determined based on the number of years the consumer used TurboTax and their eligibility. Most consumers will receive between $29 and $30, although those who filed for all three years covered by the settlement could receive around $85, according to the New York attorney general.
Reason for the Settlement: A multi-state investigation found that Intuit engaged in deceptive and unfair trade practices that restricted consumers from participating in the IRS Free File Program. Examples include using similar names for their commercial "freemium" product and the IRS Free File service and blocking the IRS Free File landing page from appearing in search engine results during the 2019 tax filing season. This effectively prevented eligible individuals from accessing the free file program. The Free File program, a collaboration between the IRS and commercial tax-preparation companies, is intended to enable approximately 70% of U.S. taxpayers to file their tax returns for free. However, IRS figures indicate that less than 3% of taxpayers utilized the Free File program in the 2020 tax year. Intuit ceased its participation in the IRS Free File program in July 2021.
In the event that an eligible individual does not receive their settlement check by mid-June, they can visit the settlement website and request a reissuance. The claimant ID number from the email notification will be required for this process. The settlement website advises individuals to check back in mid-June, after all the checks have been mailed, if they need to request a reissue.
The settlement aims to hold Intuit accountable for its actions and provide financial relief to impacted taxpayers across the nation. By compensating those who were charged for tax services that should have been free, the settlement seeks to rectify the harm caused by TurboTax's deceptive marketing practices.
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