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As tax deadline nears, FTC alleges TurboTax owner Intuit is 'misleading' users: What you need to know

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Key Points
  • The FTC is suing Intuit, the owner of TurboTax, claiming the tax software company is "misleading" users.
  • Intuit offers a free version of TurboTax but in many cases, that offer amounts to a "bait and switch," the FTC argues, because most users are charged when they file.
  • Intuit says the arguments "simply aren’t credible."

The Federal Trade Commission announced on March 28 that it is suing Intuit, the owner of TurboTax, for "misleading" users.

"TurboTax is bombarding consumers with ads for 'free' tax filing services, and then hitting them with charges when it's time to file," Samuel Levine, director of the FTC's Bureau of Consumer Protection, said in a statement Tuesday. "We are asking a court to immediately halt this bait-and-switch, and to protect taxpayers at the peak of filing season."

In response to the lawsuit, Kerry McLean, executive vice president and general counsel of Intuit, told CNBC the agency's arguments "simply aren't credible." Almost 100 million Americans have filed their taxes for free with TurboTax in the last eight years, McLean added.

TurboTax is the most popular tax software in America, used by two-thirds of those who file electronically, according to a recent report from Moody's Analytics.

How to file your taxes for free

You're eligible to file your taxes for free if you earn $73,000 or less a year, regardless of whether you're a single taxpayer, or married and filing jointly. To use the Free File program, you must go through the IRS website — not to a tax preparer, like H&R Block or TurboTax.

Free File is a partnership between the IRS and many tax preparation and filing software companies who provide their online tax preparation and filing for free.

For the 2021 tax year, which are the taxes due on April 18, 2022, about 70% of people filing in the U.S. are eligible to submit their tax returns to the IRS at no cost.

If you're filing with the IRS, "be careful," says certified public accountant Sheneya Wilson, the founder and CEO of Fola Financial. It "may still charge for state returns, though federal is free."

Wilson recommends looking into the Volunteer Income Tax Assistance, or VITA program, which offers free tax filing services to some low-income people, anyone with disabilities, as well as elderly and limited English speaking taxpayers.

For those who qualify for VITA, "both federal and state can be free," Wilson says.

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