FTC sues company over “free” tax filing campaign

Federal Issues FTC Enforcement UDAP Deceptive Consumer Finance

On March 29, the FTC issued an administrative complaint against a company that produces tax filing software for allegedly engaging in deceptive business practices when advertising, marketing, distributing, and selling their purportedly “free” tax filing services. The FTC also filed a complaint for a temporary restraining order and an emergency motion for a temporary restraining order (TRO) and preliminary injunction against the company in the U.S. District Court for the Northern District of California, stating that unless the court steps in, the company will “be free to continue disseminating the deceptive claim that consumers can file their taxes for free using [the software] when, in truth, in numerous instances, defendant does not permit consumers to file their taxes for free using [the software].” The FTC stated in its announcement that millions of consumers are unable to take advantage of the tax filing software’s allegedly “free” service (including those who get a 1099 form for work in the gig economy or those who earn farm income), noting that roughly two-thirds of tax filers were unable to file their taxes for free in 2020. According to the complaint, these consumers are often informed they need to upgrade to a paid version to complete and file their taxes. The FTC specifically pointed to the company’s “Absolute Zero” ad campaign, in which the company informed consumers that its “offering was truly free.” The agency said company’s campaign included the words “Free Guaranteed” to “bolster and emphasize the claim that the offer was truly free.” While many of the company’s ads do contain a fine print disclaimer clarifying that the offer is limited to consumers with “simple tax returns,” the FTC said this is inadequate to cure the misrepresentation that consumers can file their taxes for free because the disclaimers are “disproportionately small compared to the prominent text emphasizing that the service is free,” appear for just seconds, and are in writing only and not read by a voiceover.