Intuit to pay $141 million in restitution for deceptive tax preparation practices

May 4 (UPI) -- TurboTax owner Intuit agreed to pay $141 million in restitution to millions of low-income residents for deceptive practices, the New York attorney general's office announced Wednesday.

Attorney General Letitia James said many low-income residents were lured into paying for tax services that should have been free. She said New York will receive $5.4 million for more than 176,000 New York residents who believed they were fooled into paying for services.

"Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to," James said in a statement. "For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we're putting millions of dollars back into the pockets of impacted Americans.

"This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal. New Yorkers can count on my office to protect their wallets from white-collar scammers."

The agreement covers victims in all 50 states and the District of Columbia.

Intuit offered a product called TurboTax Free Edition, which was free for taxpayers with simple returns as defined by Intuit. TurboTax had marketed this "freemium" product aggressively, including through ad campaigns, but was actually only free for approximately one-third of taxpayers.

"In contrast, the IRS Free File products were free for 70% of taxpayers," the attorney general's statement said. "The OAG's multistate investigation found that Intuit engaged in several deceptive and unfair trade practices that limited consumers' participation in the IRS Free File program.

"The company used confusingly similar names for both its IRS Free File product and its commercial 'freemium' product. Intuit bid on paid search advertisements to direct consumers who were looking for the IRS Free File service to the TurboTax 'freemium' product instead."

The office also said Intuit purposefully blocked its IRS Free File landing page from search engine results during the 2019 tax filing season, effectively shutting out eligible taxpayers from filing their taxes for free.