H&R Block used deceptive marketing and unfairly deleted tax filer data, FTC complaint alleges

After cracking down on TurboTax maker Intuit, the Federal Trade Commission has filed an administrative complaint against H&R Block, alleging the company deceptively marketed free filing products and wrongfully deleted users’ tax data.

H&R Block marketed free products to many consumers who didn’t qualify and made it difficult to downgrade, according to the complaint. One hurdle to switching products included “data wiping” — or deleting a user’s in-progress tax return information — which required them to start again from scratch.

“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 statement Friday. 

While downgrading requires the tax filer to contact customer support by chat or phone, product upgrades happen “seamlessly,” the complaint alleges.

“We believe we provide our clients with a great deal of value, unmatched tax expertise, and fair and transparent pricing,” Dara Redler, chief legal officer of H&R Block, wrote in an emailed 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.”  

Ed Mierzwinski, consumer advocate at U.S. Public Interest Research Group, said PIRG is pleased to see the FTC pursuing H&R Block and Intuit for “misleading” or “deceptive” promises of free tax filing products. 

This is the second FTC action against tax filing software providers in recent history. Last month, the FTC banned deceptive advertising from TurboTax maker Intuit after upholding a September ruling that found the company violated federal law. The opinion said Intuit marketed free TurboTax software to filers who were not eligible and upgraded the filers to deluxe and premium products. 

An Intuit spokesperson said the company has appealed the “deeply flawed decision” and expects to prevail “when the matter ultimately returns to a neutral body.”  

Meanwhile, consumers have several free tax filing options this season, including a Direct File pilot via the IRS, which will offer limited free filing for certain taxpayers in 12 states by mid-March. Last week, an IRS official said the pilot would soon be available to the public in the 12 states for “short, unannounced windows of time.”

Taxpayers can also use IRS Free File, which offers free guided software for filers with an adjusted gross income of $79,000 or less for 2023, among other choices.

Don’t miss these stories from CNBC PRO:

• Berkshire Hathaway is one of the most overbought stocks on Wall Street. Here are the others
• Want an Nvidia alternative? These 6 chip suppliers look set to gain big from the AI boom
• Jefferies says buy this under-the-radar software stock with ties to Nvidia and nearly 20% upside
• ‘Opportune time to invest in real estate’: Pros name 5 REITs to buy right now