TurboTax Free File Lawsuit Agreement Reached

A class-action lawsuit was filed against Intuit in May 2019 alleging that taxpayers using TurboTax's free tax filing product were misled into purchasing online tax filing services. Recently, Intuit entered an agreement with all 50 states and the District of Columbia, including a $141 million settlement. Here are additional details.

In the findings conclusion of the multistate agreement, paragraph 69 states, "(T)he Attorneys General have reason to believe that Intuit has engaged in deceptive and unfair acts and practices in violation of the States’ Consumer Protection Acts, in the marketing, advertising, promotion, and sale of online tax preparation products." Paragraph 71 states, "Solely for purposes of this Assurance, Intuit neither admits nor denies any of the Findings in paragraphs 3 through 70 of this Section." 

Injunctive relief was ordered by the court with an assurance of voluntary compliance from Intuit, including

• prohibitions against misrepresentations
• required disclosures and business practices for advertising and marketing of free products
• prohibitions against data-clearing practices
• voluntary withdrawal from and injunction against rejoining the IRS Free File Program
• payments to the settlement fund and administrative fund

The majority of the $141 million settlement will be used for restitution; however, $2.5M was set aside to cover the costs and expenses incurred in administering the settlement fund.

Intuit is also required to provide information about the 4,472,788 consumers affected to the Fund Administrator, including but "not limited to, the following for each consumer: full name; last known and prior mailing addresses, email addresses, and telephone numbers; and for each of Tax Years 2016, 2017, and 2018, the TurboTax Paid Product used by the consumer, if any, the amount the consumer paid to Intuit for said TurboTax Paid Product, and the amount of any credits, chargebacks, or settlement amounts already paid by Intuit or received by such consumer for the TurboTax Paid Product."

The signed agreement includes Appendix A - "Free, Free, Free Advertisements" which shows a screenshot and description of each of the nine commercial spots Intuit used to promote their Free File product. 

Since the TurboTax agreement, at least one legal firm has begun an investigation into certain Intuit Directors and Officers to determine if any breached their fiduciary duty to the company and its shareholders based on the outcome. Scott+Scott Attorneys at Law LLP is "investigating whether members of Intuit’s board of directors or senior management failed to manage Intuit in an acceptable manner, in breach of their fiduciary duties to Intuit, and whether Intuit and its shareholders have suffered damages as a result."