FTC Accuses H&R Block of Deleting Tax Data to Discourage Customers From Downgrading

An H&R Block tax preparation office on Flatbush Avenue in the Prospect Heights neighborhood of Brooklyn borough in New York City on Feb. 6, 2024. Michael M. Santiago/Getty Images

The U.S. Federal Trade Commission (FTC) filed a complaint against tax preparation company H&R Block for deleting tax data of customers who were seeking less costly options.

With the deletion of tax data, customers were forced to start tax return filing from scratch, thus creating “a significant disincentive to downgrading,” the FTC announced on Feb. 23.

“This stands in contrast to the upgrade process, where consumers’ data seamlessly moves to the more expensive product instantly,” the FTC said.

H&R Block also marketed its products as “free” when they were not for many customers, it stated. Such practices “cost consumers time and money.”

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

Difficulty Downgrading

In its complaint, the FTC said that H&R Block has offered multiple online tax filing services during each tax season since at least 2014. The difference between the services is not just the cost but also the number of tax forms, tax situations, and schedules covered by the product.

The “free” plan supports the least number of tax forms and schedules, with “Deluxe,” “Premium,” and “Self-Employed” plans covering more.

H&R Block has designed its online products in a way that makes downgrading a “pain point,” the complaint stated. To downgrade, customers must “spend time attempting to contact H&R’s customer service department,” which the complaint states is a process made deliberately “difficult.”

Customers have to speak to a live customer service agent on the phone or through the product’s online chat service option to downgrade. Only after the company authenticates the customer’s account can the person request a downgrade through an interactive voice response (IVR) system on the phone.

In April 2022, an FTC investigator “made at least five attempts” to contact H&R Block’s customer service to downgrade an online tax product, two times through online chat and three times via phone.

The chat contacts were successful and took 20 minutes to finish, “with most of that time spent waiting for a live customer service agent to join the chat.” In contrast, the three phone contact attempts were unsuccessful.

Calls to the IVR failed to authenticate the investigator’s account and were placed on hold to wait for a customer service agent. However, after waiting for 10 to 15 minutes, the calls abruptly ended.

In April 2023, the same investigator contacted H&R Block again to request a downgrade using IVR. This time, the company downgraded the account. After the investigator logged out of his account and then logged back in, all tax information entered earlier for filing returns was deleted.

Such deletions have been practiced at H&R Block since at least the 2014 tax season, the FTC said, noting that the company has received several complaints over the years on the issue.

Yet H&R Block continues with this practice “in an effort to coerce customers into purchasing Online Products that are more expensive than the consumer needs or wants,” the FTC said.

Deceptive Marketing

The FTC also alleged that H&R Block “deceptively markets” its free plan. From at least 2018 to 2020, the company promoted the plan as “free with no limitations, disclosures, or disclaimers.” Some ads used “vague statements that did not let consumers determine whether the product was free for them,” the FTC said.

Certain advertisements promoted the free plan as being limited to a “simple return.” However, what constitutes a simple return was never defined or explained in the ads, the complaint stated.

In some instances, customers came to H&R Block’s webpage and started filing their returns under the free plan without being provided key information such as tax forms and schedules covered under the plan. Only after customers were partially through preparing the returns did H&R Block disclose to them that they did not qualify for the free plan and must upgrade to a paid one.

“This material information is provided to consumers only after they have spent significant time and energy and input sensitive personal and financial information into H&R Block’s user interface,” the complaint said.

H&R Block’s Chief Legal Officer Dara Redler defended the company in a statement to The Epoch Times, saying it provides clients “a great deal of value, unmatched tax expertise, and fair and transparent pricing.”

Clients have been offered a “free DIY filing option for more than 20 years,” Ms. Redler said. The resources made available by H&R Block demonstrate the company’s commitment to making filing taxes “more accessible and more transparent for all,” she said.

Ms. Redler said that H&R Block enables customers to downgrade their plans through “multiple mechanisms while ensuring the preparation of accurate tax returns.”

This is the latest complaint against H&R Block that accuses the company of not acting in the interest of customers.

In 2022, tax filing software firms, including H&R Block, were alleged in a report to have violated the financial privacy of their customers by sending sensitive personal information to Facebook.

A report by Democrats in Congress last year also accused H&R Block and other tax preparation companies of having “shared millions of taxpayers’ data with Meta, Google, and other Big Tech firms.”