H&R Block Concealed Free Tax-Filing Software from Public, Class Action Claims

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Another proposed class action lawsuit claims H&R Block, Inc. has pushed lower-income taxpayers to use its paid tax preparation services while concealing a free online filing feature the company is contractually obligated to offer to eligible consumers.

According to the lawsuit, H&R Block and 11 other tax software companies formed defendant Free File, Inc., which purports to be “a nonprofit coalition of industry-leading tax software companies partnered with the IRS to provide free electronic tax services.” As part of the agreement with the IRS, the suit explains, H&R Block and the other Free File members promised to offer free online tax return preparation and filing services to 70 percent of U.S. taxpayers, while the federal government agreed in exchange to stay out of the electronic tax preparation software market.

According to the lawsuit, however, less than 2.5 percent of eligible consumers, a group comprised of the lowest income taxpayers, have actually taken advantage of the free filing service. As the lawsuit tells it, the gap between those eligible to file for free and those who actually take advantage of the feature is of H&R Block’s design.

“The reason for this disparity,” the complaint states, “is due in large part to H&R Block’s deceptive practices to prevent lower-income taxpayers from utilizing the program in favor of its paid product offerings.”

The lawsuit alleges that H&R Block directs consumers to its paid offerings “whenever possible” and has deliberately attempted to hide its obligatory free filing option from view on its website and in search engine results. From the complaint:

H&R Block has further misled consumers by deceptively advertising a “highly limited” “Free Online” offering separate from its true free filing services, according to the case. After entering their information, taxpayers are frequently told that they are ineligible for the “Free Online” services and are directed to one of the defendants’ paid products, the suit says. H&R Block apparently fails to mention that taxpayers could still be eligible for the company’s free file software, which the case stresses can only be accessed through a separate website.

According to the lawsuit, the defendants’ deceptive conduct has allowed H&R Block to generate “millions of dollars of ill-gotten gains from persons who can least afford it.”

Similar lawsuits have been filed against Intuit over its alleged concealment of TurboTax's free filing option.