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TurboTax maker Intuit faces mass arbitration

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A person holds their smart phone which includes the title "Intuit turbotax."

TurboTax is displayed on a smart device in February 2018. (Kimberly White/Getty Images for TurboTax)

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The IRS offers some taxpayers the option to file their taxes online for free using commercial software. But this year, fewer companies will be participating.

Intuit, maker of the popular TurboTax program, is out, and it has been in a fight with many of its customers since a 2019 ProPublica investigation found that the company allegedly misled consumers into paying for supposedly free services.

Justin Elliott is one of the reporters who broke the story. He said TurboTax has tried to shield itself from traditional class-action suits. The following is an edited transcript of our conversation.

Justin Elliott: TurboTax, in its terms of use, told its customers that you’re not allowed to use that class-action mechanism. And instead, you have to pursue a case, sort of on a one-off basis, in this private process outside the court system known as arbitration. A law firm out in Chicago called Keller Lenkner has actually for the first time in recent years helped customers file tens and tens of thousands of these individual arbitrations against TurboTax, which are now making their way through the process.

Kimberly Adams: Is there any precedent for this kind of strategy?

Elliott: So the same law firm has used this strategy, which is called mass arbitration, in recent years on behalf of workers, delivery drivers for DoorDash and Postmates, the delivery companies. So it’s been used in a small handful of cases. I believe this is the first at least major case involving consumer fraud cases.

Adams: How much money could this mass arbitration end up costing the company?

Justin Elliott (Courtesy Claudio Papapietro for ProPublica)

Elliott: One of the notable dynamics of these mass arbitrations is that Intuit, the company that makes TurboTax, actually has to pay the administrative fees for each arbitration, which can run to several thousand dollars. So, when you have perhaps 100,000 people filing for arbitration, and the company is potentially on the hook for $3,000 for each case, suddenly the company is facing just administrative fees of tens, or maybe even hundreds, of millions of dollars. The plaintiff-side law firm has used those administrative costs imposed on the company essentially as leverage to try to pressure the defendants into settling, which has not yet happened here.

Adams: For tax filers this season, what should they keep an eye out for?

Elliott: You’re gonna see a lot of companies advertise tax filing software labeled with the word “free.” It’s important to know that as you go through the filing process, products that are labeled as “free” sometimes become not free and you might have to end up paying a fee. One option that people should know about is the IRS offers a free filing version that you can find on the website if you made under $73,000 last year.

Intuit has denied wrongdoing. In a statement this month to ProPublica, the company said, “Intuit was at all times clear and fair with its customers.”

Related links: More insight from Kimberly Adams

We’ll link to Elliott’s recent article and his initial reporting from 2019.

We’ll also include a link to the IRS website Elliott mentioned, in case you want to check out the companies that are still part of the Free File program.

And as the conflict in Ukraine unfolds, we also want to include links to tech coverage of the situation.

Technology reporter Taylor Lorenz has a piece for Input magazine about the meme pages on Instagram posting content about the war, often sharing unverified videos for the sake of going viral.

TechCrunch also has a page for up-to-date responses from tech companies on how they’re responding to the military invasion and misinformation campaigns.

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