The FTC is investigating Intuit over ‘free file’ tax returns

The tax man cometh

The Federal Trade Commission is actively investigating Intuit, maker of the popular TurboTax tax preparation software, according to a new report by ProPublica. The case was revealed in a public court filing, in which Intuit sought to limit the scope of the investigation.

The investigation centers on TurboTax’s “Free File” product, offered free of charge to most Americans in exchange for the assurance that the IRS would not develop a competing product. But a string of ProPublica investigations found that Intuit had made Free File difficult to find, in one case adding code to prevent it from being indexed by search engines. As a result, many users who were eligible for the free TurboTax filing may have been diverted to paid products.

Now, the FTC is investigating whether Intuit’s handling of Free File may be legally actionable. In May, the commission issued a civil investigative demand to the company, seeking investigative hearings with “at least eight different Intuit employees,” according to an Intuit filing. Other demands included a corporate hearing notice that would require significant additional testimony. Intuit contested the demand as unduly burdensome, but after hearing the motion, the court declined to impose additional restrictions.

In a statement to ProPublica, Intuit defended its record. “Intuit has a long-standing commitment to free tax preparation,” the company said, “including 55 million completely free tax returns filed over the last 5 years, more than all other tax prep software companies combined.”

Congressional Democrats had urged the FTC to investigate the company as far back as June 2019, including Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (D-VT).

“Hiding Free File from the public clearly aligns with the financial interests of these companies, [and] has likely added countless costs in additional fees for low-income preparers,” the senators told the FTC in a public letter.

Warren and Sanders have also introduced legislation that would simplify tax returns in an effort to reduce the need for specialized tax software. Intuit has vigorously opposed these efforts.