The Federal Trade Commission filed a
The FTC claimed Friday that H&R Block's online tax filing products led consumers into higher-priced products designed for more complicated tax filings, even though many taxpayers often didn't need the extra tax forms and schedules offered by those products.
The commission staff alleged Block failed to clearly explain which of its products cover which forms, schedules or tax situations, so customers would begin preparing their tax returns in products that were more expensive than they needed. When users later realized they didn't need or want those more expensive products, however, H&R Block presented them with a series of time-consuming challenges when they tried to downgrade after already spending substantial time entering their tax information.
When consumers tried to downgrade, H&R Block required them to contact its customer support team via chat or phone. Then, its system would delete all the tax data the consumers had entered, requiring them to start their tax return from the beginning, creating a significant disincentive to downgrading. In contrast, with the upgrade process, consumers' data would seamlessly move to the more expensive product instantly.
The complaint alleged that while consumers could upgrade without contacting H&R Block customer service, the opposite was true for the downgrade process. Since at least 2014, customers who tried to downgrade have needed to reach out to the company to ask for a downgrade — a process that has often been frustrating and time-consuming.
In addition to Block's practices regarding downgrades, the complaint also alleged the company has engaged in deceptive advertising for years, marketing its online tax preparation services as "free" when many consumers aren't eligible to use the company's free products. The FTC vote to issue the administrative complaint was 3-0.
H&R Block disputed the FTC's claims.
"We believe we provide our clients with a great deal of value, unmatched tax expertise, and fair and transparent pricing," said Dara Redler, chief legal officer at H&R Block, in a statement emailed to Accounting Today. "We are confident in the value our services and offerings provide to our clients who have trusted H&R Block for nearly 70 years. H&R Block has offered a free DIY filing option for more than 20 years to help millions of Americans file their taxes. The multitude of resources we offer to all filers via educational resources, free tools, and calculators, and the Tax Institute demonstrates our commitment to making filing your taxes more accessible and more transparent for all. Further, H&R Block allows consumers to downgrade to a less-expensive DIY Product via multiple mechanisms while ensuring the preparation of accurate tax returns."
The complaint highlighted a number of advertisements by H&R Block on TV and online claiming consumers could file for "free" with the company. The ads included language stating — sometimes only in fine print — the "free" offer applies only to "simple returns." The ads, however, don't explain what a "simple return" is. The complaint pointed out that H&R Block has changed its definition of a "simple return" several times in recent years. According to the complaint, the company was aware of consumers' frustration and confusion with the misleading advertisements.
The complaint comes as the Internal Revenue Service is
