TurboTax charged for ‘free’ tax filings, proposed class-action lawsuit claims

(Bloomberg) — Intuit Inc., maker of TurboTax tax-preparation software, lured customers into using the service with the promise of free filing of U.S. returns only to charge them anyway, according to a lawsuit on behalf of disgruntled customers.

For the 2018 tax season, any taxpayer whose adjusted gross income was $66,000 or less is eligible to use tax preparation software from any of a consortium of tax-preparation providers known as the Free File Alliance, which is led by TurboTax, according to the complaint filed Sunday in federal court in San Jose, California.

Although 70 percent of U.S. taxpayers are eligible to file for free, fewer than 2.5 percent actually use the program. “The reason for this stark discrepancy,” the plaintiffs allege, “is due in no small part to an array of deceptive practices employed by TurboTax (and its competitors) to prevent lower-income taxpayers from utilizing the program in favor of its paid product offerings.”

An Intuit spokeswoman, Diane Carlini, declined to comment.

The class-action suit was filed by three plaintiffs who seek to represent other customers.

Probes into TurboTax and its competitors were spawned as ProPublica, a nonprofit investigative journalism organization, published installments of its series on how tax-preparation companies “have worked against making tax preparation easier and less costly.”

Last week, Intuit and H&R Block Inc. were sued by the Los Angeles City Attorney, Mike Feuer, who accused the companies of undermining the Internal Revenue Service’s Free File program. Earlier, Senator Elizabeth Warren and other lawmakers asked the IRS and the Federal Trade Commission to investigate whether tax preparation companies are hiding their free services by manipulating search engines.

The case is Sinohui v. Intuit Inc., 5:19-cv-2546, U.S. District Court, Northern District of California (San Jose).