FTC Targets H&R Block For Deleting Customer Tax Prep Data

In their latest move against tax prep companies, federal regulators accused H&R Block (HRB) of deliberately deleting customer data and airing misleading ads for free tax filing services. 

The Federal Trade Commission (FTC) filed a complaint against the firm Friday, saying the company made filing difficult for customers who started filling out their tax returns with a more expensive service than they needed and then tried to switch to a cheaper option. The company required taxpayers to contact customer service to make the switch and then would delete all the information they entered, forcing them to start all over again.

“H&R Block designed its online products to present an obstacle course of tedious challenges to consumers, pressuring them into overpaying for its products,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a press release. “Today’s action demonstrates that companies using coercive techniques that harm consumers can expect to hear from the FTC.”

The FTC, a government consumer watchdog agency, also accused the company of advertising “free” tax prep services without making it clear that most taxpayers don’t qualify for the company’s free services and would have to pay. The allegations are similar to those the FTC and state attorneys general have made against Intuit’s (INTU) TurboTax, which resulted in Intuit paying a $141 million settlement to the states. Intuit is disputing the FTC’s complaint. 

H&R Block denied its pricing and services were unfair to customers.

“We believe we provide our clients with a great deal of value, unmatched tax expertise, and fair and transparent pricing,” said H&R Block Chief Legal Officer Dara Redler in a statement. “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 FTC’s move is the government’s latest in a series of actions against the tax prep industry. On top of the regulatory actions by the FTC, the IRS is launching a pilot version website that allows taxpayers to file their federal returns online directly to the tax agency this tax season, bypassing the need for third-party tax prep software.

Consumer advocates and some politicians have long argued that taxpayers should be able to file their taxes online for free without a tax prep service acting as a middleman, similar to how filing works in many other countries. Previous government efforts, such as the little-known and seldom-used “Free File” program, worked with the private industry to offer free filing services to people with annual incomes of $79,000 or less.

The Inflation Reduction Act, signed by President Joe Biden in 2022, changed that approach and gave the IRS funding to set up an online tax filing service for the first time in its history.