TurboTax, the tax filing software company, was recently sued by the Federal Trade Commission (FTC). What’s the charge? Deceiving consumers with bogus advertisements pitching “free” tax filing that millions of Americans could not use. 

Next up on TurboTax’s journey with the FTC is a stop in a federal district court. The FTC has asked a court to order Intuit (TurboTax’s parent company) to halt the deceptive advertising immediately. Free HIPAA is an equally misleading phrase. Both “Free Filing “ and “Free HIPAA” are not free for the reasons discussed below.

Free Free Free Too Good to Be True

Centuries ago, Ben Franklin noted, “Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes.”  Notably, Franklin said nothing about banking on the concept of free tax filing services. This saying, for which he is so well-known, reflects an unavoidable life truth: doing business comes at a cost.

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Free is Not Free No Matter How Many Times the Phrase “Free” Is Used

TurboTax, however, has tried to deny this truth. It has touted its “free tax filing services” “ubiquitously,” to use the FTC’s language. Some of TurboTax’s ads consist almost entirely of the word “free” spoken or stated repeatedly. The reality: the free service is not available to millions of taxpayers – ⅔ of all taxpayers, in fact. 

According to the FTC, the TurboTax website does not disclose adequately to consumers, including those who see Intuit’s advertisements, the limitations on eligibility for the “free” version of TurboTax. When TurboTax used disclaimer language, it did so misleadingly and incompletely.

TurboTax’s “free” tax filing services have applied to individuals filing “simple tax returns.” Consumers diligent enough to find the phrase “simple tax returns” on Intuit’s website, however, have received zero guidance from Intuit – the webpage is just plain silent – on how Intuit defines the phrase “simple tax return.”  

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Free for Me, Not for Thee

According to the FTC, Intuit would not consider the following consumers as “filing a simple tax return:”

  • Consumers earning independent contractor or small business income, such as consumers working in the gig economy by, for example, providing rideshare services or delivering groceries
  • Consumers earning income from a farm, farm rental, or farm equipment
  • Consumers earning income from selling a home
  • Consumers earning income in the form of a prior year’s state tax refund
  • Consumers earning investment income

The limitations on what constituted a “simple tax return” were, according to the FTC, hidden on Intuit web ads behind a hyperlink over the words “See why it’s free.” Consumers had to click on the hyperlink to trigger a pop-up explaining the limitations.

This is not, of course, what most consumers actually did. Instead, most clicked on a prominently displayed orange button saying “File for $0.” These consumers were then brought to a login screen to commence an online, automated “interview” to begin entering information to file their taxes. Consumers who were not eligible – the “non-simple tax return filers” – would not learn they were ineligible until they had already invested significant time and effort creating an account and inputting their sensitive personal and financial information into TurboTax. No learning about “no free taxation” until the point of too-late-to-do-anything-about-it rejection, in other words.

In its answer to the complaint, TurboTax claims that it has ceased its allegedly deceptive behavior. The FTC claims otherwise, noting that TurboTax is still bombarding consumers with ads for “free” tax filing services, and then slapping the consumers with charges when it’s time to actually file.