Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: On Tax Day, FTC urged to continue cracking down on TurboTax junk fees, (Apr 15, 2024)

By Sheri Wattles-Miller, J.D.

FTC asked to continue working to protect taxpayers from tax preparation companies’ false advertising and junk fee schemes.

Just in time for last-minute tax filing, Senator Elizabeth Warren (D.-Mass.) urged Federal Trade Commission Chair Lina M. Khan to continue going after Intuit, Inc., the maker of TurboTax, for its practice of false advertising and upselling TurboTax users despite numerous federal and state lawsuits and settlements. In her letter, dated April 15, 2024, the Senator supports the FTC’s oversight of Intuit, stating that the company has, for years, abusively and unfairly piled junk fees onto users of its “free” products. According to the letter, a review of the TurboTax website revealed that a taxpayer who would qualify for the IRS free Direct File tool would instead pay $133 for federal and state filing on TurboTax and would be solicited to add additional services eight or more times by the product.

In the past couple years, TurboTax has been the subject of numerous complaints to federal and state agencies. In March 2022, the FTC filed an administrative complaint against Intuit, Inc., for deceiving consumers with bogus advertisements.

As the FTC’s administrative action was pending, New York Attorney General Letitia James announced in May 2022 a multistate settlement agreement between Intuit and all 50 states and the District of Columbia, requiring Intuit to pay low-income consumers for allegedly deceiving them into paying for tax services that were offered by the IRS at no cost. The agreement requires Intuit to pay $141 million in restitution to millions of consumers across the nation who were unfairly charged. Intuit also agreed to refrain from making certain representations in connection with promoting or offering “free” products, among other things.

Earlier this year, the FTC issued an Opinion and Final Order that Intuit engaged in deceptive advertising in violation of Section 5 of the FTC Act and deceived consumers when it widely ran ads touting the company’s “free” tax products and services for which many consumers were ineligible, the agency announced. Upon de novo review of the facts and the law, the FTC rejected Intuit’s affirmative defenses and upheld the agency’s Chief Administrative Law Judge’s Initial Decision. Intuit has appealed the Commission’s decision to the U.S. Court of Appeals in New Orleans. Intuit’s request to stay the FTC’s order was denied.

According to Senator Warren, Americas spend an average of nine hours and $150 to file their taxes, due to junk fees charged by Intuit and others. Despite the FTC’s attempts to hold tax preparation companies to a certain standard, she continues, Intuit still tries to trick and trap TurboTax users into paying junk fees to file even very simple tax returns.

Further, the Senator concludes, "[g]iven Intuit’s ongoing anti-taxpayer practices, it is outrageous that the company continues to fight the FTC lawsuit and lobby against the IRS Direct File program. I applaud your work to crack down on Intuit’s false advertising and junk fees, and urge you to continue your efforts to protect taxpayers from these schemes."

Companies: Intuit Inc.

News: Advertising ConsumerProtection FederalTradeCommissionNews