About 4.4 million Americans tricked into paying tax via TurboTax instead of completing the tax filing for free are receiving their refunds.
New York Attorney General Letitia James announced a settlement with the state attorney general Wednesday afternoon in which Intuit, the owner of well-known tax preparation software TurboTax, will pay $141 million in restitution for clients it “unfairly was charged,” according to an announcement. The customers will receive $30 per year for the years they were eligible for the government-funded IRS Free File program but ended up paying taxes due to TurboTax’s ambiguous system.
“Intuit has cheated millions of poor Americans from the tax filing services that they could have been entitled to,” James said in the announcement. “Today, every state is holding Intuit responsible for defrauding taxpayers of millions of dollars, and we’re putting thousands of dollars in the pockets of the affected Americans.”
Agreement
The agreement came following New York and other states looked into TurboTax for its strategy of encouraging users to pay for tax preparation alternatives even though they could have filed free of charge with IRS Free File. IRS Free File is a collaboration between the federal government and various name-brand software that assist Americans who earn less than certain income levels in filing their tax returns annually.
TurboTax has been accused of directing customers who wanted to avail IRS Free File offer the IRS Free File offer to its own “freemium” product, which was advertised as being free. Still, in reality, it was charged fees to several customers. It was accused of changing the names of the filing service several times (including the commercial version being referred to as “Free edition”) and hiding the IRS Free File webpage from search engines, making information regarding pricing and eligibility difficult to locate.
Intuit removed itself from The official IRS Free File initiative last year, even though it permits certain customers to file tax returns at no cost. However, the settlement demands the company stop misleading customers about its services, make its statements clearer, and implement other more favourable consumer improvements.
Intuit declared on Wednesday that it “already adheres to the majority of these practices in advertising and anticipates little impact on business as a result of the other changes in the future.” Its general counsel and executive vice president, Kerry McLean insists that Intuit has admitted to no wrongdoing and remains “clear and honest in its dealings with customers.”
Who is eligible to receive a TurboTax refund?
The TurboTax settlement extends the tax year 2016 to 2018. The tax year 2016 to 2018 is for those that “started with TurboTax’s Free Edition” in those years and “were told they were required to pay for filing regardless of being eligible to file free under TurboTax’s Free File program.” As per the announcement, the IRS Free File program offered by TurboTax” are covered in the settlement.
The exact phraseology of the agreement
“Covered consumer” refers to anyone, or any individuals with a joint return filed, who during the tax Years 2016 and 2017 or 2018, was (1) qualified to use the Intuit IRS Tax-Free File product; (2) began his or her tax return using TurboTax’s free Edition Software; (3) was informed that they were not eligible to use a TurboTax free Edition product; (4) subsequently paid to use a TurboTax Paid Products and (5) did not use any of the Intuit IRS Tax-Free File Product before a tax year.
At the time, the maximum income threshold to take advantage of TurboTax’s IRS Free File offer was approximately $34,000.
While New York put out the announcement that it was announcing the agreement, all 50 states, as well as Washington, D.C., have signed the agreement. Based on preliminary estimates, states with the highest percentage of eligible customers for refunds are Texas, California, Florida, Illinois, Pennsylvania, North Carolina, New York and Ohio.
