Calling TurboTax ‘free’ is ‘deceptive advertising,’ says FTC

Regulators are continuing their crackdown on third-party tax filer claims.
Person completing 1040 tax form with calculator
The FTC says TurboTax is often anything but 'free.' Deposit Photos

Intuit’s TurboTax services are anything but “free,” even though its allegedly deceptive ad campaigns claimed otherwise for years. According to a Federal Trade Commission (FTC) judge’s ruling, the popular tax filing service must stop labeling any of its products as no-cost unless a rigorous set of conditions are “clearly and conspicuously” displayed to users, per the FTC’s announcement on September 8.

Consumers are bombarded with third-party service advertisements every year during tax season, many of which tout supposedly free options to most users. Regulatory scrutiny in recent years, however, has made it clear that a large portion of these claims are inaccurate at best, or otherwise intentionally misleading. Last week’s initial decision from the FTC’s Administrative Law Judge D. Michael Chappell, although subject to an automatic full commission review, makes it clear that regulators aim to clamp down on the predatory bait-and-switches.

[Related: Major tax-filing sites routinely shared users’ financial info with Facebook.]

“[T]he evidence proves that Intuit engaged in deceptive advertising in violation of Section 5 of the FTC Act,” reads a portion of Chappell’s 242-page ruling. “[Intuit] advertised to consumers that they could file their taxes online for free using TurboTax, when in truth, for approximately two-thirds of taxpayers, the advertised claim was false.”

The immediate halt to advertising “free” TurboTax filing options can only lift if Intuit adheres to a detailed set of FTC guidelines. Any solely visual or audio communication (i.e. radio ads), for example, must include disclosures in the same medium as the ad is presented. Television ads, meanwhile, must include disclosures in both audio and visual methods. Online advertisements, face-to-face communications, and product labels also include comparably stringent disclosure requirements if Intuit wishes to boost “free” services.

As Ars Technica reported last week, Intuit announced in its own response statement that it plans to appeal the “groundless and seemingly predetermined decision,” and the company “and is confident that when the matter ultimately returns to a neutral body Intuit will prevail, as it has previously in this matter.” Intuit representatives are possibly referring to an April 2022 federal court decision denying an FTC motion for a preliminary injunction regarding TurboTax “free” filing ads. The following month, Intuit agreed to a $141 million restitution penalty for nearly 4.4 million filers misled by TurboTax’s Free Edition claims between 2016 and 2018.

[Related: A free IRS e-filing tax service could start rolling out next year.]

The latest regulatory pressure comes as the federal government and IRS are reportedly moving towards testing a free e-filing system for taxpayers beginning in January 2024. According to anonymous sources speaking with The Washington Post at the time, the IRS is developing the program with help from the White House’s technology consulting agency, the US Digital Service. If launched publicly, the universal free filing portal would add the US alongside nations providing similar services, including Australia, Chile, and Estonia.