Attorney General Bonta Supports FTC Enforcement Action Against TurboTax, Continues Fight Against Deceptively Advertised Tax Products

Monday, June 24, 2024
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FTC order is legal and necessary 

OAKLAND — California Attorney General Rob Bonta today joined 22 attorneys general in filing an amicus brief in support of the Federal Trade Commission's (FTC) cease-and-desist order against Intuit, maker of TurboTax. The FTC found that Intuit deceptively advertised supposedly “free” tax-filing products and ordered Intuit to cease all deceptive activity and make disclosures to cure the claims in its advertisements. In 2022, California, as part of a coalition of 51 attorneys general, announced a $141 million nationwide settlement against Intuit involving similar findings of illegal deceptive advertising. In their brief, the attorneys general argue that the FTC's order is lawful, supported by ample evidence, and complementary to — rather than duplicative of — states’ prior settlement against Intuit.

“Every tax season, hardworking Californians put their trust in online tax filing services like TurboTax, which promise to find taxpayers the best deals,” said Attorney General Bonta. “FTC’s investigation, like our 2022 multistate investigation, found that Intuit repeatedly and deliberately broke that promise. I support FTC's parallel enforcement authority — protecting consumers from deceptive business schemes requires everyone at the table, both states and the federal government." 

In 2022, the FTC brought an administrative complaint against Intuit for deceptively advertising its seemingly “free” TurboTax products, which were not actually free for most users. Intuit’s advertisements consistently conveyed to consumers that they could file a tax return with TurboTax for free, and disclaimers on these advertisements were insufficient to counteract this message. Many consumers did not realize that TurboTax would not allow them to file their tax return for free until after they had invested significant time and shared sensitive personal and financial information with TurboTax.  

In the amicus brief, the attorneys general argue that the FTC’s cease-and-desist order against Intuit rightly concluded — consistent with states’ prior investigation — that Intuit engaged in illegal misconduct by depicting TurboTax as free, even though it was not free for most consumers; the order is entirely consistent with longstanding principles of both state and federal consumer protection law; and the order furthers the dual role that states and the federal government play in policing unscrupulous businesses and protecting consumers nationwide.  

The FTC allegations parallel the findings of a multistate investigation of Intuit that settled in May 2022. Attorney General Bonta, as part of a coalition of 51 attorneys general and with the Los Angeles City Attorney and Santa Clara County Counsel, announced a $141 million settlement against Intuit, resolving allegations that the California-based company deceptively advertised its “free” online TurboTax products. Although 70% of taxpayers qualified for the “IRS Free File Program,” operated by Intuit and others, less than 3% of taxpayers used it to file their returns in 2020. This abysmal rate was due in part to tricks and tactics used by Intuit to steer taxpayers away from the IRS Free File Program and toward Intuit’s paid commercial products. The multistate settlement included strong injunctive terms and $141 million in direct consumer restitution, $11.4 million of which went to approximately 370,000 Californians who were eligible for a free tax filing program and were instead deceived into paying to file their federal tax return. 

IRS Free File and Direct File

IRS Free File lets qualified taxpayers prepare and file federal income tax returns online using guided tax preparation software. In May 2024, the IRS made Direct File, a program in which taxpayers can file their federal taxes directly with the IRS for free, a permanent option for filing tax returns, and announced plans for expanding access to more taxpayers for the 2025 filing season. During the 2024 filing season, Direct File saved some 140,000 taxpayers an estimated $5.6 million in filing costs, according to the Department of the Treasury.

Attorney General Bonta is committed to standing up for Californians’ financial protection and their right to file taxes safely. Last month, Attorney General Bonta announced a settlement with Liberty Tax for running deceptive advertisements that misled consumers into thinking they were getting a free advance on their tax refund when they were actually taking out a high-cost loan. In March, Attorney General Bonta issued a consumer alert with tips on preparing taxes safely, and advised Californians to file early, take actions to protect themselves online, and learn about free or low-cost tax filing opportunities.

In submitting the amicus brief, Attorney General Bonta joins the attorneys general of the District of Columbia, Illinois, Arizona, Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, and Wisconsin.

A copy of the letter can be found here.

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