The Federal Trade Commission (FTC) this afternoon announced it has filed an administrative complaint against H&R Block for wiping out customers' entered data as a way to pressure them to pay for higher-priced tax preparation software options.
The data erasure, according to the FTC charge, was when the taxpayers tried to downgrade to more affordable H&R Block software products.
In addition, the FTC alleges that the company deceptively marketed their products as free when many consumers actually had to pay for them.
"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.
The practices, argues the FTC s cost consumers time and money.
Continual upselling: The FTC complaint alleges that H&R Block coerced customers to pay for services they didn't need.
That happens, contends the FTC, because H&R Block fails to clearly explain which of its products cover what forms, schedules, or tax situations, leading many consumers to start completing their tax returns in products that are more expensive than they need.
When consumers did realize, already spending substantial time entering their tax information, that they did not need or want more expensive H&R Block products, the FTC complaint alleges that the company put up roadblocks via a series of time-consuming challenges.
Not a technical error: Since at least 2014, consumers attempting to downgrade have had to contact H&R Block customer service to request a downgrade, according to the FTC.
And when customers insisted on downgrading to a more affordable option, the FTC alleges that H&R Block wiped out most of those taxpayers' previously entered tax data.
The FTC complaint contends that the data lass wasn't a technical system glitch.
Rather, the FTC alleges that when customers upgraded, all their tax data transferred seamlessly to the more expensive product instantly.
But it was the opposite for H&R Block customers looking for a more affordable product, according to the FTC. The complaint alleges that taxpayers who downgraded saw their data deleted, forcing them to choose between overpaying or losing all the information they had already entered.
Confusing advertising definitions: The FTC also has issues with H&R Block advertising, alleging that the company deceptively marketed its services as free. However, that no-cost promotion actually doesn't apply to most taxpayers, according to the complaint.
The company's ads did say that the free option applied to simple returns, but the FTC alleges H&R Block made it difficult for taxpayers to determine whether their filings met that standard.
In addition, alleges the FTC, the tax prep company frequently changed its own definition of simple.
Tax Felon Friday: The FTC action against H&R Block is the second time in a month that the agency has come after a major tax preparation company.
On Jan. 23, the FTC slammed TurboTax for its deceptive free filing offers.
Last month's FTC action against Intuit's popular tax software was not a criminal action. Similarly, today's H&R Block compliant is administrative, not criminal.
The FTC notes that it issues an administrative complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
But since these tax software giants are used by millions of taxpayers, and both TurboTax and H&R Block have bowed out of IRS Free File participation, I've opted to include this latest FTC administrative action regarding filing options as part of the end-of-week Tax Felon Friday feature.
It's a good reminder that caveat emptor is critical during tax filing season, regardless of how you prepare and file your taxes. You need to thoroughly check out tax software — just as you would real, live, human tax preparers — before deciding which product (or person!) to use.
And if you want to check out more criminally-related tax actions (and investigations and prosecutions and verdicts), click on over to the ol' blogs' special Tax Felon Friday page.
You also can find more posts on definitely criminal tax actions, notably posts those that were published long before I gave them a special end-of-week feature, in the, what else, tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- 5 tax tips for Free File users
- Your tax e-file and, if necessary, e-payment options
- Picking the perfect tax pro for your filing (and more) needs
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