Millions of TurboTax Customers Will Get Refunds in New Legal Settlement

·4 min read
Money; Shutterstock
Money; Shutterstock

Some 4.4 million Americans who got duped into paying to file taxes through TurboTax when they could have filed for free are officially getting their money back.

New York Attorney General Letitia James announced a legal settlement Wednesday in which Intuit, the company that owns popular tax preparer TurboTax, agreed to provide $141 million in restitution to customers it “unfairly charged,” according to a news release. Those customers will receive $30 for each year they qualified for the federal IRS Free File program but ended up paying to file taxes due to TurboTax’s confusing system.

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” James said in the release. “Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans.”

The agreement comes after New York and other states investigated TurboTax for encouraging customers to use paid tax prep options when they could have filed at no charge through the IRS Free File, a partnership between the government and several name-brand softwares to help Americans below certain income levels do their annual taxes.

TurboTax was accused of funneling people seeking the the IRS Free File offer to its own “freemium” product, which was widely advertised as free but actually charged fees to many customers. To do this, it allegedly changed the name of its filing services multiple times (including calling the commercial version “Free Edition”), hid its IRS Free File webpage from search engines, and made specifics about pricing and eligibility hard to find.

Intuit pulled out of the official IRS Free File initiative last year, though the company continues to allow some customers to file taxes for free. Still, the settlement requires the company to stop misrepresenting its products and make its disclosures clearer, in addition to implementing other consumer-friendly improvements.

Intuit said in its own statement Wednesday that it “already adheres to most of these advertising practices and expects minimal impact to its business from implementing the remaining changes going forward.” Kerry McLean, its general counsel and executive vice president, emphasized that Intuit admitted no wrongdoing and remains “clear and fair with its customers.”

Who’s eligible for a TurboTax refund?

The TurboTax settlement covers tax years 2016 through 2018. People who “started using TurboTax’s Free Edition” in those years and “were told that they had to pay to file even though they were eligible to file for free using the IRS Free File program offered through TurboTax” are included, according to the release.

The exact wording from the settlement is:

‘Covered consumer’ means any individual, or individuals if a joint return was filed, who in Tax Years 2016, 2017, or 2018 was (1) eligible to use an Intuit IRS Free File Product; (2) began his or her tax returns using a TurboTax Free Edition Product; (3) was informed that he or she was ineligible to use a TurboTax Free Edition Product; (4) subsequently paid to use a TurboTax Paid Product, and (5) had not used the Intuit IRS Free File Product in a previous tax year.

At the time, the income limit to use TurboTax’s IRS Free File offer was about $34,000.

Although New York put out the announcement, all 50 states and Washington, D.C., joined the agreement. States with the most refund-eligible customers, according to preliminary estimates, include Texas, California, Florida, Illinois, Pennsylvania, North Carolina, New York and Ohio.

How to get a refund from TurboTax

The agreement tasks Intuit with contacting affected customers, so if you qualify you should be hearing from the company soon.

The way you get paid may vary. The release says that “impacted consumers will automatically receive notices and a check by mail,” though the settlement goes on to say Intuit must create a system where people “may elect to receive their payments through an electronic payment processor such as Venmo, PayPal or Zelle instead of by check.”

Intuit will also eventually create a settlement website and hotline where people can obtain more details, as well.

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