Michigan tax filers to get checks in the mail after TurboTax settlement

Every now and then, you get an oddball check in the mail and wonder "What's this all about?"

This month, out-of-the-blue checks for around $29 to $30 each are expected to arrive in the mailboxes of more than 122,000 Michigan consumers who paid too much to get their taxes done via TurboTax. Many consumers had low incomes and would have qualified for the Internal Revenue Service Free File Program.

Instead, those consumers were "tricked by TurboTax’s owner Intuit into paying for free tax services," according to a statement by Michigan Attorney General Dana Nessel.

The returns in question involve tax years 2016, 2017, and 2018. How much money a consumer gets is based on the number of tax years they paid for services that could have been free. Individuals who filed for three consecutive years could get up to $85, according to a statement by the New York Attorney General.

Some lower-income consumers will still be out cash, as some could have paid around $100 for some services.

Do I have to fill anything out?

A key warning: Consumers do not have to fill any forms, pay anything or provide any account information to receive a payment, if they qualify for the multistate settlement.

Michigan is part of a multistate $144 million million settlement, first announced in May 2022. About 4.4 million tax filers nationwide are owed money. All 50 states and the District of Columbia have signed onto the agreement.  Intuit admitted no wrongdoing.

Michigan consumers who are eligible in the group will receive more than $3.5 million.

Intuit provided the Free Press with the following statement: “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.”

More: Is the IRS really texting you? No, it's one of many tax scams.

How do you know if the check is real?

Eligible consumers will be sent an email by the settlement fund administrator, Rust Consulting. No claim needs to be filed. Checks will automatically be mailed throughout May.

You can see how to verify your check in the "Common Questions" section agturbotaxsettlement.com and find other details. Consumers are told not to contact Intuit with questions about settlement fund distribution.

"For years, Intuit misled the most vulnerable among us to make a profit," according to a statement made in May 2022 by New York Attorney General Letitia James who led the investigation. James worked in partnership with the attorneys general of Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas and Washington.

James noted then that "every state in the nation is holding Intuit accountable for scamming millions of taxpayers."

James gave more details of how the money would be sent on May 4.

"We are righting that wrong and putting money back into the pockets of hardworking taxpayers who should have never paid to file their taxes," James said in a statement recently.

How 'free' was used to confuse consumers

TurboTax had been criticized in 2019 for well-orchestrated tactics designed to confuse consumers when a ProPublica investigation outlined how TurboTax engineered ways to make its IRS-related "Free File" option more difficult to find online and steer eligible taxpayers into TurboTax products that weren't free.

It's one of those slap a "free" label on something to make a bundle of money kind of ploys.

ProPublica's reporting pointed out that Intuit added code to the Free File landing page of TurboTax that hid it from search engines like Google, creating problems for consumers who were trying to find it.

In January 2020, the IRS announced some changes designed to offer more consumer protections for the "Free File" system to prevent some types of marketing and promotions.

In October 2021, TurboTax voluntarily dropped out of the IRS "Free File" program. "Intuit could not rejoin the IRS Free File Program without approval of the IRS and the Director of the Free File Alliance," according to the settlement.

What is Free File?

About 70% of taxpayers qualify for free tax software assistance via IRS.gov but only a tiny fraction of people actually use it. A chunk of that can be blamed on efforts by some tax preparation companies that participated in the program to redirect tax filers to services that could end up costing them good money.

The IRS Free File program is available for those whose adjusted gross income was $73,000 or less in 2022. Free File can even help those who have such low incomes that they're not required to file a federal income tax return but they'd miss out on valuable tax credits if they don't file.

Free File, which offers free guided tax preparation help, is open through Oct. 16 and can be found at IRS.gov. Current participants include TaxSlayer, TaxAct, FreeTax USA and others. Partners have specific offers that apply to select groups of tax filers; all offers don't cover every potential participant.

IRS to review other free filing ideas

Many tax filers would love to get free tax help — and that's why so many companies advertise limited programs offering free services during the start of the tax season. It remains essential to understand the fine print.

Given that the IRS "Free File" program hasn't been all that popular with consumers, though, it's clear something needs to change.

We'll see how things work out in the future, as the IRS reviews ways to develop a free filing system for all.

The Inflation Reduction Act, signed by President Joe Biden in August 2022, allocated $15 million to the IRS to study how the federal government might develop and run an electronic filing system that provides all consumers with a way to opt to use free government-backed tax software.

Free is a funny word, and unfortunately, one that is packed with tradeoffs. It is overused in way too many marketing pitches.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.

This article originally appeared on Detroit Free Press: TurboTax settlement checks to arrive in mail: Who gets money?