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Almost three years since filing the first government lawsuit against Intuit Inc., the maker of TurboTax, Los Angeles City Attorney Mike Feuer announced a $141 million national settlement on May 4 that includes more than $11 million for over 370,000 customers throughout California.
Feuer filed the original lawsuit alleging unfair and deceptive practices in connection with Intuit’s allegedly free online tax preparation services for low-income filers.
“We stood up for taxpayers who should never have been misled into paying for tax services they were entitled to get for free. But that’s what we allege happened here,” Feuer said. “Hundreds of thousands of customers now will get money back, and the practices we alleged at Intuit won’t be able to continue. That’s why we brought our case in the first place.”
Since 2002, Intuit and a consortium of electronic tax filing companies have promised to provide a free version of their online tax preparation products to low-income individuals in exchange for the IRS’s commitment to not compete with the consortium in providing free\online tax return preparation and filing services. According to the lawsuit, only a fraction of eligible taxpayers actually benefit from the IRS and private industry’s Free File agreement. The lawsuit alleged that the very low participation rate was attributable, at least in part, to Intuit’s deliberate efforts to hide the availability of their Free File products.
From 2007-21, Intuit offered two free products through TurboTax – one arising from a public-private partnership with the IRS and the other a commercial product – creating confusion from which Intuit profited, Feuer alleged. Intuit’s Freedom Edition, also called the IRS Free File Program, allowed anyone with an adjusted gross income of $36,000 or less, was eligible for the Earned Income Tax Credit or was on active military duty and had an adjusted gross income of $69,000 or less to use the free product to prepare and file their taxes.
In 2007, Intuit launched its own free commercial product – also named Free Edition, Feuer added. The product is free, however, only for “simple” returns, which Intuit defines as having no schedules, forms or other “complications.” Many taxpayers who began the filing process using the Free Edition were informed later in the process, after spending hours filling out their information, that they need to pay $59.99, and in some cases more than $200, because their returns are not considered “simple,” regardless of their income and the fact that they qualified for the IRS Free File product.
For information, visit lacityattorney.org.
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