Consumers Will Soon Receive a Share of a $141 Million TurboTax Settlement

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Are you in line for a payday in the wake of a major tax prep company settlement? Read on to see. 

What happened

Intuit, which owns TurboTax, has entered into a settlement agreement to pay $141 million to lower-income Americans who were charged for tax preparation software that should have been free. About 4.4 million consumers were unfairly charged for tax prep software in 2016, 2017, and 2018, reports CNBC.

So what

Taxpayers whose income falls below a certain threshold are eligible to file their taxes for free. For those filing 2022 taxes, that threshold was $73,000. In 2016, it was $64,000. Because some customers were unfairly charged for TurboTax software they were entitled to for free, the company is now sending out payments to those impacted.

“Intuit is pleased to have reached a resolution with the state attorneys general that will ensure the company can return our focus to providing vital services to American taxpayers today and in the future,” said Kerry McLean, Intuit’s executive vice president and general counsel.

While the typical payout from the aforementioned settlement will be $30, some recipients may get up to $85 if they used TurboTax for 2016, 2017, and 2018. Payments are set to begin in May, but some may not hit customers’ bank accounts until early June.

Now what

It’s estimated that 70% of taxpayers are eligible to file their taxes for free. Yet only 2% of those eligible took advantage of a free filing option during the 2022 tax season, according to the National Taxpayer Advocate’s annual report to Congress.

If you’re eligible for a free filing and your tax situation is fairly straightforward, then it generally pays to take advantage of it, provided you’re using a trusted software, like TurboTax. That said, even if you’re eligible to file taxes for free, it can sometimes work to your benefit to hire a tax preparer.

While tax software can help guide you toward the credits and deductions you may be eligible for, there’s no guarantee you’ll end up claiming all of the benefits you’re entitled to if you don’t use an actual tax preparer who knows the rules inside and out. Plus, if you’re self-employed, then it’s important to work with a tax preparer rather than file taxes on your own — even if you can do so for free.

When you’re self-employed, there’s a whole different set of tax rules to follow, and you may be eligible for deductions that salaried workers aren’t. The average cost of a tax preparer for an itemized Form 1040 is $323, according to Intuit. In many cases, the modest fee paid to a tax preparer is more than made up for via the savings involved.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.

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