FTC order forbids TurboTax being called "free" (2024)

The Federal Trade Commission issued an order against Intuit prohibiting it from describing its TurboTax product as "free."

The order says that a good or service must not be represented as "free" unless it is made free for everyone. Getting more specific, the order added that a company cannot misrepresent, either expressly or by implication, any material fact pertaining to the cost of anyone's goods or services, including any TurboTax product or service. Further, they cannot imply that consumers can only file their taxes online accurately if they use a paid TurboTax product or service, that consumers can only claim a tax credit or deduction if they use a paid TurboTax product or service or any other fact material to consumers concerning any good or service, such as the total costs; any refund policy; any material restrictions, limitations or conditions; or any material aspect of its performance, efficacy, nature or central characteristics.

If Intuit chooses not to make TurboTax free for everyone, the order said it must clearly and conspicuously in close proximity to the "free" claim disclose the percentage of U.S. taxpayers that actually qualify for the free product. If that figure is not the majority of U.S. taxpayers, the ad may simply say the majority do not qualify. In general, there can be no reasonable probability the terms are misunderstood.

For the next 20 years, the company is also required to deliver a copy of the order to all principals, officers, directors and LLC managers and members; all employees having managerial responsibilities for conduct related to the subject matter of the order and all agents and representatives who participate in conduct related to the subject matter of the order; and any business entity resulting from any change in structure. Everyone who gets a copy must then provide signed and dated acknowledgement of the order.

The order also mandates compliance monitoring and for the company to issue compliance reports.

The FTC announcement is the capstone on a long-simmering controversy about just how free the product is, which itself is part of a longer drama about free tax filing in general. This issue goes back to at least 2002, when the IRS entered into a multiyear agreement that established its Free File program. Overseen by a consortium of private tax prep companies (of which Intuit was one) called the Free File Alliance, the 2002 agreement said these companies would work together to provide free, online tax prep and filing services; while the IRS would provide people with links to these free services via IRS.gov.

In exchange, "the IRS will not compete with the Consortium in providing free, online tax return preparation and filing services to taxpayers." A report from the Congressional Research Service noted that, while controversial, this element was key in getting cooperation from the private companies.

Intuit left the Free File Alliance in 2021 in response to criticism over a ProPublicainvestigation that said Intuit and H&R Block attracted taxpayers with the free versions of their software, but steered them toward paid versions of their products. Intuit had also made it difficult for taxpayers to find the free versions of their software by using search engine code that steered taxpayers to the versions that would lead them to pay instead of to the version available on the officialIRS Free File website. The controversy sparked investigations in Congress, the IRS and the Treasury Inspector General for Tax Administration.

Despite leaving the program, Intuit said it remained committed to offering free tax filing. This remained a point of contention with the FTC, however, which led to a complaint in March 2022. Intuit vowed to fight the suit, saying the claims were without merit given over 100 million people had filed their taxes for free. Even though it later settled with 50 state attorneys general on the matter, it continued fighting the FTC suit, launching an appeal once a judge found against the company in September 2023, saying the agency's standards were unrealistic and that, further, the marketing materials did disclose that not everyone qualified. Oral arguments for the appeal were concluded in late October 2023, leading ultimately to the final order just yesterday.

"'Free' claims remain a powerful draw for consumers, but like any other advertising representation, the claim must be truthful. Don't describe your product or service as 'free, free, free' when for many consumers, the more accurate characterization is 'fee, fee, fee,'" said the FTC after the order was issued.

Rick Heineman, vice president of corporate communications at Intuit, said in an email that the decision was flawed, and predicted the matter would come up again sometime in the future.

"Absolutely no one should be surprised that FTC Commissioners - employees of the FTC - ruled in favor of the FTC as they have done in every appeal for the last two decades. This decision is the result of a biased and broken system where the Commission serves as accuser, judge, jury, and then appellate judge all in the same case.Intuit has appealed this deeply flawed decision, and we believe that when the matter ultimately returns to a neutral body Intuit will prevail," he said.