Unmasking the Deception: FTC Order Against TurboTax’s ‘Free’ Claims

The Federal Trade Commission (FTC) has taken a decisive stand against Intuit’s TurboTax, a leading tax filing software, for its deceptive advertising practices. Specifically, this FTC order has prohibited TurboTax from promoting its services as free unless they are unequivocally for all customers.

TurboTax has been scrutinized for its contentious advertising campaign promoting “free” tax services. However, many customers who responded to these advertisements were ineligible for the free benefits. The FTC launched legal proceedings against Intuit in 2022 following many customer complaints about TurboTax’s misleading claims. 

FTC’s Ruling and its Implications

Based on its conclusions that TurboTax’s advertising effort violated the FTC Act, the FTC rendered its decision. The commission also pointed out that many consumers, especially those who made their living from farming or the gig economy, could not take advantage of the free services that TurboTax was advertising.

Following an examination by the FTC, Intuit’s definition of “simple tax returns,” which qualified for TurboTax’s free edition, was erroneous and disqualified most tax filers. Less than half of TurboTax users were eligible for the free edition. After providing their disqualifying data, the commission further emphasized that ineligible clients were only notified that they needed to upgrade to a paying version.

Intuit’s Obligations and Restrictions

Based on these findings, the FTC has put some obligations and limitations on Intuit. The firm must now prominently disclose all the terms, conditions, and obligations a customer needs to satisfy to obtain the free service. It covers all the specifics about costs, refund options, or how much tax relief a buyer can claim.

Furthermore, the FTC ruling limits Intuit to any misleading statements regarding its products or services. Additionally, TurboTax must inform in its ads if most users are not eligible for free services.

Intuit has filed an appeal in a federal circuit court not under the FTC’s purview in response to the FTC’s decision. The company has categorically criticized the FTC’s decision, saying it results from a “biased and broken system.” According to Intuit, it had always been open to its customers, who consent to allow them to help with the free tax preparation process.

Controversial History

This FTC ruling is not the only time TurboTax has been held legally accountable for its advertisements. A 50-state settlement in May of 2023 allowed approximately 4.4 million people to get the checks from TurboTax. After it became widely known that TurboTax had misinformed millions of low-income Americans into paying to file their taxes. At the same time, they were eligible for free filing, and this settlement was reached.

Because the company continues to insist on its devotion to free tax preparation, these cases demonstrate a trend of deceptive advertising behavior that has led to legal action and criticism from the public. The FTC’s recent ruling is another significant blow to the company’s reputation and trustworthiness.