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Federal Tax

Complaint Against H&R Block Alleges False Advertising of Free Tax Prep

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

Two individual H&R Block customers filed a class action lawsuit against the company, claiming the cost of its online tax preparation services was misrepresented and not free as advertised.

The complaint, filed April 4 in the US District Court for the Western District of Missouri, claimed H&R block “deceptively markets” its online products and that customers do not find out they need to pay to file their taxes until the very end before submitting to the IRS.

“Our plaintiffs were allegedly lured into using their services under the guise of the services being free, only to experience an alleged bait-and-switch after they’ve been going through the long and daunting process of completing their taxes,” Morgan & Morgan attorneys John Morgan and John Yanchunis, representation for the plaintiffs, said in a joint statement provided to Checkpoint. “We have deceptive marketing laws for a reason, and our goal is to hold H&R Block accountable for their alleged misleading advertising, and to ensure that future consumers will not be duped.”

Both named individuals in the complaint, Stacey Cox of Washington and Sandra Newton of Iowa, used H&R Block’s tax software this filing season expecting to file for free after seeing advertisements. They each instead paid around $70 after learning their returns do not qualify as “simple” returns, defined by the company.

Only simple returns, those that only include select tax forms, can be filed for free. The complaint alleges H&R Block “in at least Tax Seasons 2018 into 2023” purposefully buried the list of eligible forms beneath “three different inconspicuous links” online. To find the list, customers would need to seek out a link to a product page, then a subpage on technical specifications, and finally another link at the bottom of a pop-up.

“In this way, [H&R Block] required consumers to navigate the fine print footnote and then a separate page in order to access all of the material limitations to the Free Online Product,” the complaint read. This filing season, it continued, the footnote was removed from the product page.

The plaintiffs also took issue with video ads, arguing the “Limitations apply” disclaimer is “fleeting and disappears very quickly,” only appearing in “small, nearly transparent letters” for a single frame. The disclaimer does not “explain what the limitations are, or what ‘simple returns’ mean,” according to the suit.

The class action asked the court for an award of damages and attorney costs of an amount yet to be determined. Importantly, it is only limited to online customers and excludes customers who sought in-person services. H&R Block claimed to have “helped 20+ million clients file their taxes last year,” half of which were in-person. Thus, the number of class action members could potentially be as high as over 10 million nationwide, though it is unclear how many customers were eligible for free services.

As the company is headquartered in Missouri, the complaint alleges a violation of the state’s Merchandising Practices Act (MMPA), which provides it is an “unlawful practice” to misrepresent, conceal, or omit essential material facts in connection with the sale or advertisement of trade conducted in or from Missouri. The MMPA applies to out-of-state customers.

The lawsuit is the latest in a series of legal troubles main players in the tax prep industry have found themselves in. So far this year, the Federal Trade Commission barred TurboTax maker Intuit from advertising its free tax services without disclosing that roughly a third of customers have simple returns. In 2022, Intuit settled its false advertising matter and agreed to pay $141 million to 4.4 million customers across the country.

More recently, TaxAct Inc. settled for $23 million in connection with unauthorized disclosures of taxpayer data to tech titans Google and Meta.

H&R Block denies any wrongdoing. “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 to Checkpoint. “H&R Block has offered a free DIY filing option for more than 20 years to help millions of Americans file their taxes. 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.”


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