‘False Claims and Buried Disclosures’: FTC Says TurboTax Tricks People Into Thinking They Can File for Free
As the tax filing deadline looms, the 2022 tax season is getting juicy.
On Monday, the U.S. Federal Trade Commission (FTC) formally accused the company that owns TurboTax of tricking people into thinking they can file their taxes for free — when, in reality, many have to pay.
The FTC, an independent government agency focused on consumer protection, filed a legal complaint in California demanding the courts prevent Intuit from widely advertising TurboTax's tax prep services as free. The agency is taking aim at an increasingly common human experience: when you do a bunch of work of filing your taxes online under the impression it's free, only to find out you need to pay up at the end.
While TurboTax is indeed free for some people, the FTC says, others find out "after they have invested time and effort gathering and inputting into TurboTax their sensitive personal and financial information" that they'll need to upgrade to a paid TurboTax version to complete their returns.
That's misleading, according to the complaint.
Intuit disagrees. In a blog post Monday night, the company said the FTC's arguments were "simply not credible," claiming that "over the past eight years, TurboTax products have helped nearly 100 million Americans file their taxes for free."
"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," Kerry McLean, executive vice president and general counsel, said in a statement.
McLean said that the company's ads have contributed to the adoption of free TurboTax products, "driving approximately 60% growth from 11 million free filers in 2018 before the campaign launched to more than 17 million free filers in 2021." At the end of last July, TurboTax says it had processed over 45 million federal tax returns.
TurboTax's 'deceptive' business practices
The FTC criticizes TurboTax on several fronts — in particular, its ads that have been promoting "freemium" products on TV and the internet since at least 2016.
There are some TurboTax commercials, the FTC argues, "in which almost every word spoken is the word 'free'" despite the fact that prep is actually only free for certain taxpayers with simple returns. The FTC alleges the fine-print disclaimers are flashed quickly, in small text and often not read aloud.
The complaint claims there are similar issues about transparency on TurboTax's homepage. The website didn't adequately explain to customers what a "simple tax return" is, nor make it easy to find out early on in the tax filing process, according to the complaint.
"Intuit continues to bombard consumers with the message that they can file their taxes for 'free,'" it reads. "Intuit baits consumers with deceptive ads and then compound [sic] the deception with more false claims and buried disclosures."
This isn't the first time TurboTax has been accused of sketchy business practices. In years past, ProPublica has reported that Intuit was lobbying against government free file options, tricking customers into paying and deliberately hiding its free file page from Google search results.
What about TurboTax and IRS Free File?
Contributing to the confusion is that you can file your taxes for free — and, until recently, TurboTax was partnered with the IRS to let you do just that.
TurboTax was a longtime participant in IRS Free File, a government initiative that lets taxpayers electronically file their individual federal income tax returns for free. IRS Free File gives Americans under a certain income threshold access to free guided tax preparation through sites like TurboTax; over that threshold, people can fill out free forms to file taxes on their own.
But last year, TurboTax decided not to renew its role in the IRS Free File Program. (H&R Block did the same in 2020.) At the time, TurboTax said "conflicting demands from those outside the program" made it impossible to keep participating while still offering benefits to customers.
Intuit brought up the Free File situation in its Monday response to the FTC complaint, saying it "was, at all times, in compliance with the IRS requirements."
In its Monday complaint, the FTC asked the court to step in and curb Intuit's advertising efforts while the agency moves forward with an administrative hearing related to TurboTax.
How to actually file taxes for free
Legal drama aside, you might be wondering how to file your taxes for free, given that the deadline is weeks away.
Depending on how much money you earn, the IRS Free File program is probably your best bet. If your adjusted gross income for 2021 is $73,000 or less, you likely qualify for guided tax prep through the IRS's partners. They include Free 1040 Tax Return, Online Taxes at OLT.com, ezTaxReturn.com, FreeTaxUSA, FileYourTaxes.com, TaxAct, TaxSlayer and 1040NOW.net. Several have age, income or location requirements; visit the IRS website to find one that meets your needs.
If your adjusted gross income is over $73,000 and you're knowledgeable about how to do your taxes, you can use the Free File Fillable Forms. These don't come with free tax help, so be careful.
Outside of IRS Free File, you may want to check individual tax preparers' websites to see what free offers they have now. TurboTax, for example, will let you file for free if you have the aforementioned "simple tax return" — a Form 1040 only. H&R Block and Cash App Taxes both advertise their own $0 online tax filing services.
No matter what you choose, be sure to check the fine print and keep an eye out for upcharges.
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How to File Taxes for Free in 2022