Is TurboTax Really Free? FTC Clamps Down On Deceptive Advertising Practices

In a major regulatory ruling, the Federal Trade Commission (FTC) has banned Intuit Inc., the parent company of TurboTax, from advertising its services as "free" unless they are absolutely free for all customers or if eligibility is clearly defined.

Issued on Monday, the decree states that Intuit allegedly practices deceptive advertising claiming that taxpayers could file their taxes for free using TurboTax, but many individuals did not really qualify for such free services. FTC's order, however, does not include a financial penalty.

FTC commissioner Samuel Levine said that the character of Intuit's past violations is "egregious," as the company purposely circulated deceptive ads across various media channels, including TV, radio, and digital. The ruling also supports an initial decision in September from FTC Chief Administrative Law Judge D. Michael Chappell, who had ruled that Intuit tampered with federal law via fraudulent advertising.

Intuit responded by expressing its disagreement and has already appealed calling it a "deeply flawed decision" by the FTC. In a sharp-worded statement, the company claimed that the decision is the outcome of a biased and broken system where the Commission serves as accuser, judge, jury, and then appellate judge all in the same case. Intuit believes the ruling will not be the same when directed to a neutral body.

But this is not the first time the company has faced serious allegations for advertising the "free" services. In a 2022 settlement, Intuit had to recall TurboTax's "free, free, free" ad campaign and refund $141 million to nearly 4.4 million taxpayers nationwide. As part of the agreement, settlement checks were even sent out last year to the affected taxpayers. They were basically low-income individuals eligible for free, federally-supported tax services but had paid TurboTax to file their federal returns due to their predatory marketing.

This ruling and the subsequent appeal by Intuit exhibit the continuing scrutiny and challenges faced by financial services companies offering tax-related services. As the FTC discloses more on such practices, it signifies the importance of transparency in advertising, especially in a financial industry which heavily relies on accurate and trustworthy information.

The incident also raises bigger concerns about the regulatory environment and the role of agencies like the FTC in monitoring business practices. The appeal from Intuit puts fairness and impartiality of the regulatory process into questions, especially the multiple roles played by the Commission in the case.

The appeal from Intuit highlights that the legal battle is far from being over, and the outcome will most likely have impacts on how companies market their services and the usage of terms like "free."