New York Regulator Launches Investigation Into TurboTax Maker Intuit and H&R Block

by Justin Elliott

New York's Department of Financial Services, one of the most powerful state regulators in the country, has launched an investigation into Intuit, the maker of the leading tax preparation software TurboTax, according to a person familiar with the matter.

DFS is also investigating H&R Block and two other tax prep companies.

The agency served subpoenas to all four companies this week, seeking a wide range of documents about the Free File program and the companies' marketing practices. The tax software industry has an agreement with the IRS promising to give free tax preparation and filing services to Americans who earn below $66,000 a year.

In a series of stories in recent weeks, ProPublica has detailed how the companies had a deliberate strategy to steer customers away from the free product and into paid versions in deceptive ways. The companies hid their free offerings from Google, and Intuit lied to some customers who sought refunds in the wake of the reporting.

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The investigation, which Gov. Andrew Cuomo called for last week, is being run out of the Department of Financial Services' Consumer Protection and Financial Enforcement Division. The agency regulates financial services in New York state. Intuit also holds a license from the agency to be a money transmitter.

The Intuit subpoena seeks internal marketing materials that would shed light on the company's purchase of Google ads on particular search terms as well as documents related to code that hid the TurboTax Free File page from search engines, the person said. It also seeks records that show how many New Yorkers used paid TurboTax products even though they were eligible for the Free File product.

Two other companies that signed on to the IRS' Free File deal, TaxSlayer and Drake Software, which runs 1040.com, were also served with subpoenas. The companies have until May 30 to respond.

An Intuit spokesman said "we will be cooperating with the agency's review." An H&R Block spokeswoman said that "we review and respond to all subpoenas we receive." Spokespeople for the other two companies didn't immediately respond to requests for comment.

Previous unrelated investigations by the Department of Financial Services have led to settlements and fines for companies such as Deutsche Bank, Zenefits and Western Union.

The New York subpoenas follow lawsuits that were filed privately in California and by the Los Angeles city attorney against the tax software companies in recent weeks.