TurboTax’s “free” tax prep service: often not free

It’s tax time, and like many people, you might be looking for a tax preparation service — especially one that’s free. Intuit, the company that owns TurboTax, has gotten a lot of people’s attention with ads that said things like “$0 to file” and “file FREE.” The problem? For a lot of people, it’s not actually free.

Today, the FTC announced an administrative action against Intuit for misleading people about free tax filing with TurboTax and separately has asked a federal court to stop Intuit’s deceptive advertising of TurboTax. According to the administrative complaint, since at least 2016, it was only after people spent time entering sensitive personal and financial information that many learned they’d need to upgrade to a paid TurboTax product to complete and file their taxes.

So, when is it free? Only when you meet TurboTax’s definition of a “simple return” (which they’ve changed a few times since 2016). In practice, during 2020, two-thirds of all tax filers didn’t qualify for the “simple return.” That includes people who got unemployment benefits and gig workers with 1099 forms.

Looking to do your taxes for free — for real?

• Check out the IRS Free File Program. If your 2021 adjusted gross income was $73,000 or less, you qualify for free guided tax preparation software for your federal taxes. Use this tool to find which free software is available to you, based on your income and situation.   Depending on your income and which IRS partner site you use, you might be able to prepare and file your state taxes for free too.
• Check out MilTax if you’re a servicemember or veteran. If your income is too high for the IRS Free File Program, there’s another free option for you. There’s no income limit for the Department of Defense’s free filing program, but there are some eligibility requirements.
• Look into the details. If a company advertises free tax preparation services, ask what qualifications you’ll have to meet for it to be free? Do you qualify?
• Check out IRS Free File Fillable Forms. Use these to file your federal taxes for free if your 2021 adjusted gross income was more than $73,000. These are an online version of the IRS paper forms, so you won’t get any guidance. These forms don’t help with your state tax return, so learn more by going to the website for your state’s tax agency.

Spot a tax preparation service that says it’s free but isn’t? Report it to the FTC at ReportFraud.ftc.gov.