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$141 million going to 4.4 million TurboTax users who shouldn't have paid to file

Intuit TurboTax products at WalMart_Mike Mozart_flickr CC
Mike Mozart via Flickr CC

In April 2019, the online investigative news site Pro Publica revealed that some major tax software companies who were part of the Internal Revenue Service Free File partnership instead used computer code to funnel taxpayers to their products' paid filing options.

State officials soon started their own investigations into the tax preparation marketing tactic. The following year, Intuit, the corporate parent of the popular TurboTax tax prep program, reached a settlement agreement with all 50 states (via 49 state Attorneys General and the Hawai'i Office of Consumer Protection), and the District of Columbia.

That deal ordered Intuit to pay $141 million to millions of primarily lower-income taxpayers across the country. Those filers were directed during the 2016, 2017, and 2018 tax years to TurboTax's paid software instead of the similar free option available at the IRS Free File website.

Now, more than 4.4 million taxpayers nationwide who, according to New York Attorney Letitia James, fell for the company's "predatory and deceptive marketing," will get some financial relief.

And the almost as good news is that the eligible taxpayers don't have to do anything but wait.

Compensation checks on the way: Monday, May 8, Intuit will start mailing checks to each eligible taxpayer, with the payments expected to continue through May.

The per-person payments will range from $29 to $85. That's the approximate amount a taxpayer paid Intuit, based on the number of tax years the filer used a paid TurboTax option instead of a no-cost filing program for which they were eligible.

While $141 million is a big number, the real dollar amounts that finally will end up in the hands of deceived taxpayers earn $29 and $85 this weekend's By the Numbers recognition.

Intuit admissions and explanations: You can read the 51-page PDF official voluntary settlement agreement for all the technical and legal details.

The document also includes examples of the questionable marketing television commercials, as well as a table of just how many of the overall 4,472,788 filers in each state and Washington, D.C., paid for tax filing help they could have received at no cost.

In yet another case where leading the pack isn't necessarily where you want to be, Texas has the most misdirected filers. There are 465,793 Lone Star State taxpayers who will get a settlement payment. They represent 10.41 percent of covered consumers, the only double-digit percentage in the tally.

I'm sure the IRS also will appreciate the settlement sections where Intuit admits that it "Hid Its Free File Landing Page from Search Engines for Approximately Five Months During the Peak of Tax Season" in 2018 and "Used Paid Search Terms to Direct Consumers Searching for the IRS Free File Program to Intuit's 'Freemium' and Paid Products."

That's small consolation for the federal tax agency, but at least it helps explain somewhat why its Free File option isn't that popular.

No steps necessary to get paid: But if you are of the affected filers, you probably don't care about such details. You're just interested in getting your money.

As mentioned earlier, you don't have to do a thing.

Intuit already knows the customers who in tax years 2016, 2017, or 2018 were eligible —

  • to use an Intuit IRS Free File Product,
  • began doing their returns using a TurboTax Free Edition Product,
  • were informed they were ineligible to use a TurboTax Free Edition Product, and
  • subsequently paid to use a TurboTax Paid Product instead of using the Intuit IRS Free File Product.

If that's you, you should have already received an email from the TurboTax payment fund administrator — no, it wasn't a scam — and don't need to take any further action for your payment to be sent.

However, the company recommends that you hang onto that email — move it from your trash/junk file to your inbox — in case you need to follow up on your payment. The emailed settlement notice has your official Claimant ID Number.

The company also asks that you "allow adequate time for delivery." That's especially true for those filers whose payment is not mailed until late May. In that's your case, your compensation won't arrive in your U.S. Postal Service mail box until early June.

If mid-June rolls around and you still haven't received your payment, you can go to the Intuit Multi-State Settlement website and request a reissue. To do that, you'll need the email claimant number mentioned earlier.

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