Summary
- A class action lawsuit against TaxAct claimed the tax software company shared its users’ private financial data with third parties like Facebook and Google.
- Individuals who used TaxAct to prepare their taxes between 2018 and 2022 are part of the class and will share in a $14.95 million settlement unless they opt out.
- The deadline to join or opt out of the class is September 11, 2024, and the settlement could be finalized by the end of the year.
TaxAct will pay nearly $15 million to settle a class action lawsuit, but customers must act fast to claim their share of the settlement. Once finalized and approved by the court, this settlement will resolve a class action lawsuit against the do-it-yourself tax software giant. The TaxAct lawsuit alleged the company violated privacy laws by sharing users' personal and financial information without proper consent.
Users of the online tax preparation service who qualify as part of the class must file a claim online or by mail no later than September 11, 2024.
What Is the TaxAct Lawsuit?
Nicholas C. Smith-Washington was the named plaintiff in a class action lawsuit filed in January 2023 in California. The suit alleges that TaxAct shared users' personal and financial information with Meta Platforms, Inc. (formerly referred to as Facebook), Google and Google Double Click without the users' consent.
The plaintiff brought these claims under the California Invasion of Privacy Act, which is stronger than any federal privacy law. Although the defendants successfully transferred the case to California federal court, the U.S. District Court for the Northern District of California applied state law to evaluate whether the defendant's actions were lawful.
The lawsuit alleges that despite assurances of confidentiality on TaxAct's website, the company shared its users' sensitive personal and financial information with multiple third parties. This information included the filer's name, phone number, income, filing status, type of return, age range, employment status, investments, names of dependents and other personal identifiers.
How Does this Lawsuit Represent All Affected Users?
Smith-Washington brought his lawsuit on behalf of himself and every other TaxAct user whose data was shared with third-party advertising platforms. This type of case is called a class action lawsuit. It allows one person (or a small group of plaintiffs) to pursue a lawsuit on behalf of everyone who was similarly harmed by the defendant or defendants.
Class action lawyers help identify data breaches, consumer fraud and other violations that potentially affect large groups of people. Individually, each claim may not be worth much–certainly not enough for any one person to hire an attorney and pursue a lawsuit. However, class action lawsuits can involve thousands or millions of affected consumers. In total, their claims can be extremely valuable.
To start a class action lawsuit, the lead plaintiff(s) must prove to the court that they have a valid claim on behalf of themselves and many others who suffered similar injuries. If the court approves, they will represent this group through litigation and settlement or trial. If the plaintiff recovers compensation, the entire class shares the award, although some individuals or groups may receive more than others.
Individuals who qualify to be part of the class must affirmatively "opt out" if they wish to pursue their own legal action against the defendants for the claims in the lawsuit. Otherwise, they lose their individual right to sue for their damages, even if they never knew about the class action. (The Federal Trade Commission is investigating the effectiveness of current notification methods and exploring potential alternatives.)
Anyone wishing to opt out of the settlement must submit their request by September 11, 2024.
Who Can File a Claim in the TaxAct Class Action Lawsuit?
All individuals who used TaxAct's online federal tax filing service between two and six years ago (January 1, 2018, through December 31, 2022) and had a U.S. postal code are eligible to receive a portion of the settlement proceeds. (This includes members of the military who file taxes using an overseas APO/FPO address since these have U.S. postal codes.)
Many class members have already been notified via email or postcard of their eligibility for inclusion in the class and their right to opt-out. However, users who have moved or changed email addresses may not have received such notice. Other eligible individuals, such as spouses of users who filed joint tax returns, may not have been registered as class members.
How Much Will I Receive in the TaxAct Lawsuit Settlement?
The total settlement amount is about $14.95 million. Before any of this is distributed to the class members, the plaintiff's attorneys will take a percentage of the total recovery as their compensation and pay all costs associated with the litigation. Then they will divide up the remainder among the class members.
The official TaxAct class action settlement website estimates the individual payout for eligible claimants in the TaxAct settlement will be about $18.65. Members who were California residents during the applicable time period and those who filed joint returns with their spouses may receive slightly higher amounts. The exact individual payouts will depend on how many additional class members file unexpected claims before the deadline.
The settlement will not be finalized until a judge reviews it to ensure the settlement terms are fair and rules on any objections that have been filed. The Final Approval Hearing is currently scheduled for November 21, 2024, but may be delayed or rescheduled due to unresolved case issues or other court conflicts.
How Do I Submit a Claim?
If you believe you meet the eligibility criteria and have not received notice of your inclusion in the class, you can submit a claim form. (There is no advantage or penalty for submitting a duplicate claim form, so if you are unsure, go ahead and send one!) If you already received notice that you were included and your contact information hasn't changed, you don't have to do anything but wait for the settlement to be disbursed.
Claim forms can be submitted online through the official settlement website or mailed to:
You must submit your Claim Form online no later than September 11, 2024, or mail your completed paper Claim Form so that it is postmarked no later than September 11, 2024.
If you have questions about the case or your right to opt out of the class, contact an experienced attorney.
