The FTC’s Enforcement Action Against H&R Block: Ensuring Fair Advertising and Consumer Protection in Tax Preparation Services
The Federal Trade Commission (FTC) has concluded its investigation into H&R Block, a leading tax preparation company, culminating in a final order requiring the company to implement significant changes to its online tax filing services and compensate consumers with a $7 million settlement. This action stems from allegations that H&R Block engaged in deceptive advertising practices, promoting its online tax products as "free" while obscuring eligibility requirements and imposing obstacles for consumers seeking more affordable options.
The FTC’s complaint centered on three key issues: misleading advertising of "free" products, cumbersome downgrade procedures, and data deletion practices. The investigation revealed that H&R Block failed to adequately disclose the scope of its free offerings, leading consumers to invest time in preparing their returns only to discover they were ineligible. Furthermore, downgrading to a less expensive product proved unnecessarily difficult, requiring consumers to contact customer service and potentially lose entered data. Conversely, upgrading to a more expensive product was seamless, suggesting a deliberate attempt to steer consumers towards higher-priced options.
The FTC’s final order mandates several changes to H&R Block’s practices, aimed at improving transparency and consumer experience. By February 15, 2025, the company must implement a streamlined downgrade process, enabling consumers to switch products without contacting customer service. By the 2026 tax filing season, H&R Block must cease deleting consumer data during downgrades, ensuring that users can seamlessly return to their previous progress. Additionally, the company is required to clearly disclose in its advertising the percentage of taxpayers eligible for its "free" products or explicitly state that most taxpayers do not qualify. These measures are designed to empower consumers with accurate information and facilitate informed decision-making when selecting tax preparation services.
The $7 million settlement will be used to compensate affected consumers and cover related expenses. H&R Block is required to provide the FTC with relevant customer information to facilitate this process. To ensure ongoing compliance, the company must maintain detailed records of its online product revenues, consumer complaints, refund requests, and advertising materials for a period of up to five years. This comprehensive documentation will allow the FTC to monitor H&R Block’s adherence to the order and deter future violations.
While H&R Block maintains that the quality of its online tax preparation products has never been in question, the company has expressed its willingness to comply with the FTC’s order. Many of the required changes are reportedly already underway, and H&R Block has stated its commitment to focusing on serving its clients during the upcoming 2025 tax season. This response suggests a desire to move forward and restore consumer trust, although the long-term impact of the FTC’s action remains to be seen.
The FTC’s unanimous vote to approve the final order underscores the seriousness of the allegations against H&R Block. Commissioner Andrew Ferguson, while supporting the overall decision, expressed reservations about the count related to the marketing of free products. He had hoped for guidance from a separate case involving similar claims against Intuit, the maker of TurboTax, but that case did not provide the clarity he sought. The Intuit case, which challenges the FTC’s administrative process, highlights the ongoing debate surrounding the agency’s authority and the appropriateness of its enforcement mechanisms.
In the meantime, taxpayers seeking free tax filing options have alternatives beyond commercial providers. The IRS offers several programs, including DirectFile and Free File, designed to assist taxpayers with different income levels and tax situations. Free File, available through IRS.gov, partners with private-sector tax software companies to provide free filing services to eligible taxpayers. Generally, those with an Adjusted Gross Income (AGI) of $84,000 or less in 2024 can utilize these services. Each partner sets its own eligibility criteria based on factors such as age, income, state residency, and military status. For taxpayers with an AGI above $84,000, the IRS offers Free File Fillable Forms, which are electronic versions of paper tax forms suitable for those comfortable preparing their own returns using IRS instructions and publications. These resources ensure that free tax filing assistance remains accessible to a wide range of taxpayers.
