TurboTax has long used deceptive advertising touting free tax preparation on the popular platform, when in reality many people needed to pay for its filing services, the Federal Trade Commission’s top officials ruled Monday.
One week before the start for tax-filing season, the FTC’s three commissioners found that Intuit INTU, +0.20%, the maker of TurboTax, had committed “egregious” violations of the federal prohibitions against deceptive acts and practices.
The agency’s decision said TurboTax can have it one of two ways: Either the brand can refrain from advertising any good or service for free unless it’s free for everyone, or TurboTax ads have to clearly state either how many people could be eligible for the free offering or that the majority may not be eligible. That disclosure needs to be close to the word “free,” the FTC officials said in a 91-page opinion.
The 3-0 decision, from FTC Chair Lina Khan and two commissioners, upholds a September ruling by the chief administrative judge within the agency.
In current advertising for its free edition, Intuit says about 37% of filers qualify for the service. There’s a nearby link detailing the tax forms and credits that are and are not covered by the free edition.
Intuit reached a $ 141 million settlement with state attorneys general in 2022 for allegedly deceiving customers into paying for tax services, with those settlement funds rolling out to affected users last year. Intuit admitted no wrongdoing in the settlement, and has pushed hard against government assertions that it tricked users.
On Monday, an Intuit representative blasted the FTC ruling.
“This decision is the result of a biased and broken system where the Commission serves as accuser, judge, jury, and then appellate judge all in the same case. Intuit has appealed this deeply flawed decision, and we believe that when the matter ultimately returns to a neutral body Intuit will prevail,” spokesperson Tania Mercado said in a statement.
For the upcoming filing season, the IRS is testing its own no-cost tax filing program in 12 states. But the “Direct File” program has critics in the tax-software industry, and Intuit has been especially vocal with its criticism.
The FTC commissioners ruled that Intuit had “blanketed the country with deceptive ads to taxpayers.”
That included years of TurboTax ads repeatedly billing its services as “free.” The ads in question ran from November 2018 to April 2022, and were pulled as the FTC case was heating up.
“Intuit continued running the ads, knowing that they led consumers to believe that they could file their returns for free, even though approximately two-thirds of taxpayers are not eligible,” the agency’s opinion said.
Intuit knew taxpayers were “frustrated that Intuit led them to believe they could file for free even though Intuit heavily restricted who was eligible for free filing,” it added.
Intuit shares closed 1.35% higher Monday but were trading 0.2% lower in after-hours trading.