In a significant move, the Federal Trade Commission (FTC) has issued a final order and opinion, declaring TurboTax, the widely-used tax filing software, engaged in deceptive advertising practices. The FTC has now banned TurboTax from advertising its services as ‘free’ unless the offering is genuinely free for all customers.
TurboTax’s misleading ads, promoting “free” tax services that were not accessible to many customers, violated the FTC Act, leading to consumer deception, as stated by the regulatory agency. The FTC initially filed a lawsuit against Intuit, the owner of TurboTax, in 2022, alleging that the majority of tax filers did not qualify for the company’s supposedly “free” services, particularly those receiving 1099 forms for gig economy work or earning farm income.
The FTC’s Administrative Law Judge D. Michael Chappell had already made the initial decision in September, which was upheld by the commission on Monday. Intuit, in response, has appealed the decision to a federal circuit court outside the FTC, expressing dissatisfaction with what it calls a “deeply flawed decision.”
As per the FTC’s orders, Intuit is now prohibited from advertising or marketing any goods or services as free unless they genuinely offer free access to all customers. The company must also provide clear disclosure of the percentage of customers eligible for the free service, ensuring transparency in its advertising claims. If the service isn’t genuinely free for the majority, TurboTax must explicitly state this.
Furthermore, the FTC has mandated that Intuit must clearly and conspicuously disclose all terms, conditions, and obligations required to obtain the purported ‘free’ service. The order prevents Intuit from misrepresenting any material facts about its products or services, including price, refund policies, or consumers’ ability to claim tax credits or deductions without using TurboTax’s paid service.
This development follows a 50-state settlement in May, where TurboTax’s parent company, Intuit, agreed to pay roughly 4.4 million people for allegedly steering low-income Americans away from free tax-filing services. The investigation arose from a 2019 ProPublica report accusing TurboTax of directing eligible clients toward its paid version by making federally supported tax filing products hard to find in web searches.
The FTC’s actions aim to rectify TurboTax’s deceptive marketing practices, ensuring fair treatment for consumers and reinforcing transparency in the tax-filing software industry.
