FTC Sues Intuit to Stop Advertising Free Tax Filing Services

The Federal Trade Commission sued to stop Intuit Inc. from telling prospective customers that its tax preparation services are free -- a little more than two weeks before the U.S. tax-filing deadline for most people.

Millions of Americans file their taxes each year by April 15 using Intuit’s TurboTax software and online services. It’s free for customers, but only those with simple tax returns.

“For many others, Intuit tells them, after they have invested time and effort gathering and inputting into TurboTax their sensitive personal and financial information to prepare their tax returns, that they cannot continue for free; they will need to upgrade to a paid TurboTax service to complete and file their taxes,” the FTC said in the lawsuit, filed in federal court in San Jose on Monday.

Intuit disputed the FTC claims.

“The FTC’s arguments are simply not credible,” Kerry McLean, executive vice president and general counsel of Intuit, said in a statement. “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.”

McLean said the company complies with all Internal Revenue Service requirements.

“The fact that Intuit complied with the rules and regulations of one government agency, but is now being targeted by another, demonstrates a significant disconnect,” McLean said. “With the FTC’s action, companies will be much less willing to enter into public-private partnerships with the government that benefit consumers.”

The FTC asked the court to issue an injunction ordering Intuit to stop running ads that mislead consumers, such as those in an ongoing “Free, Free, Free, Free” campaign, which stresses the no-cost version of TurboTax and includes one ad that repeats the word “free” more than 40 times in 30 seconds.

TurboTax ads include disclaimers that advise consumers that the free version is limited to filers with simple tax returns. But the disclaimers are disproportionately small in text ads and appear for only a few seconds in video ads — and are thus, inadequate, the FTC said.

Also Monday, the FTC said it filed an administrative complaint alleging that Intuit’s TurboTax ads constituted unfair and deceptive advertising.

The case is Federal Trade Commission v. Intuit Inc., 5:22-cv-01973, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story:
Robert Burnson in San Francisco at rburnson@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Joe Schneider

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