Some people who used the tax program could receive money back.
Few people relish sitting down to do their taxes each year, and many find the annual chore a difficult one. So it's no wonder that many Americans turn to tax software from companies like Intuit's TurboTax for help.
However, TurboTax has been accused of tricking millions Americans into paying for its services even though they qualified to file their taxes for free. Now some people who used TurboTax may be eligible for a payment as part of a recent settlement. Here's what to know.
For several years, Intuit and other tax-preparation industry leaders, such as H&R Block, aggressively lobbied Congress to prevent the IRS from creating its own free tax filing system. In 2019, Congress passed the Taxpayer First Act, in which the IRS agreed not to create its own system as long as tax-filing corporations provided free services to qualifying taxpayers by way of the Free File Alliance. That group is a partnership between the IRS and the tax software industry that offers free filing options for Americans earning $73,000 or less.
But it hasn't always been easy for people to find the free-file options that the prep services are supposed to be offering. The online news site ProPublica has reported extensively on this in a series it dubbed "The TurboTax Trap."
"ProPublica found that [Intuit] deceived customers who were eligible for free tax services and instead rerouted them to enroll in paid versions," The New York Times reported last year.
In May 2022, New York state Attorney General Letitia James announced a record multistate agreement with Intuit. The company must pay $141 million in restitution to millions of consumers nationwide, as well as suspend its "free, free, free" ad campaign.
It's a very specific group of people. You're eligible if you tried to use TurboTax's Free Edition for tax years 2016 through 2018, but then were told you were ineligible to file free, and went on to pay for a TurboTax product. That group includes nearly 4.4 million people. All 50 states and the District of Columbia are included.
You shouldn't have to do anything but wait for your money. If you're eligible, you should have already received an email stating that you're included. Check your email account, including those spam folders, as you may not have been expecting this email.
Questions can be submitted via the settlement website.
James' statement says consumers will receive a direct payment of approximately $30 for each year that they paid for tax-filing services that should've been free. The actual amount each taxpayer will receive will be spelled out in their individual email.
There's a short and handy FAQ about the settlement online that notes payments will be mailed throughout May of this year. If you haven't received your payment by mid-June, you're asked to visit that website, which should then tell you how to inquire about your money. Keep the email you received, as you'll need the Claimant ID number if your check doesn't arrive.
"Intuit is pleased to have reached a resolution with the state attorneys general that will ensure the company can return our focus to providing vital services to American taxpayers today and in the future," a representative for Intuit said in a statement sent to CNET.
That response is also included in a longer statement posted on Intuit's blog, which says the company admitted no wrongdoing and agreed to pay the money in order to "put this matter behind it."
As of 2022, Intuit and H&R Block no longer participate in the free tax help program, which has led to some calls for the IRS to go back to the idea of creating its own free-file system. But it doesn't seem to be a priority for Congress at this time.
As Vox points out, the IRS is already sends copies of the various W-2 and 1099 forms that people use to prepare their taxes every year. It wouldn't be difficult for the IRS to use that information, pre-populate a tax form, and send it out to taxpayers, providing the option to file their own taxes if they aren't comfortable with that version as prepared.
But will we see that anytime soon? Unlikely.