TurboTax parent Intuit is under fire once again, this time as multiple state attorneys general open an investigation into whether it deliberately steered low-income taxpayers away from free-file options they may have been eligible to use.
The investigation includes at least five state attorneys general, according to ProPublica, including from North Carolina. The exact number, however, is not clear.
A spokesperson for Intuit did not comment on the investigation specifically but said the company is cooperating with regulators.
"We are cooperating with regulatory inquiries and confident that we have been honest with consumers, over 13 million of whom filed their taxes with TurboTax last year for absolutely free," the spokesperson said.
As noted by ProPublica, Intuit said in a filing earlier this year it believes the allegations in legal proceedings are “without merit,” adding that it would “vigorously defend” itself.
Individuals with incomes of $66,000 or less are eligible to file for free through the IRS’ Free File program – a partnership with third-party preparers. While 70 percent of Americans are eligible to use it, only 2.5 percent did so in fiscal 2018 (fewer than 3 million people of 104 eligible) – which some have attributed to the companies’ (Intuit and H&R Block) deliberate efforts to hide the products.
A group of senators asked the IRS to bring in an outside contractor (MITRE) to review the Free File program in May amid criticisms that industry partners were engaging in deceptive practices and not acting in the best interest of taxpayers.
The claims appear to be true. The report showed five of the 12 members of the program used a coding device to keep their Free File landing pages out of organic searches. However, engagement still increased at four of five of those partners.
Other explanations for low engagement were that half of the eligible taxpayers used a paid preparer, while others received refund-anticipation checks, filed paper returns or visited volunteer tax assistance sites.
Overall, about 30 million do-it-yourself filers were eligible to use the program, and about 9 percent of them did.
Intuit has been sued in a consumer class-action lawsuit over the allegations. It has also been sued by the city of Los Angeles and Santa Clara County.
A growing number of lawmakers, including New York Rep. Alexandria Ocasio-Cortez and Massachusetts Democrat Sen. Elizabeth Warren, have voiced support for a system where the IRS is able to play a larger role in the tax preparation process.