The Federal Trade Commission says one tax preparation giant is intentionally making filing taxes more difficult.
The Consumer Protection Agency sued H&R Block, alleging that the company used deceptive marketing techniques to force consumers to pay for unnecessary services.
The FTC's complaint alleges that H&R Block makes it more difficult for consumers to choose low-cost or free online filing packages, frequently changes its own definition of a simplified tax return, and many people do not qualify for free filing. They claim that they were misled into thinking they were eligible for free tax filing when they were not. .
The complaint, filed last week, says the company “sold more expensive services at higher prices without providing a clear breakdown of costs,” and said consumers should contact customer support if they wanted to downgrade. There is. If that happens, all your tax data will be wiped out and you'll be forced to “start over” after hours of data entry.
This tactic created a “significant disincentive to downgrades,” the FTC said.
The agency said that starting around 2014, taxpayers seeking a downgrade had to contact H&R Block directly. In contrast, the upgrade process in which consumers chose more expensive products was seamless.
H&R Block responded to the FTC's complaint with the following response:
“We believe we offer our clients tremendous value, unparalleled tax expertise, and fair and transparent pricing,” said Dara Redler, chief legal officer at H&R Block. The company added that it is “allowing consumers to downgrade to a less expensive service.” His DIY products with multiple mechanisms. ”
The FTC has targeted large tax preparation firms in recent years for deceptive marketing of free services and products, often luring consumers and then charging them higher fees.
“H&R Block designed its online products to present consumers with an obstacle course of tedious challenges and force them to overpay for their products,” FTC Consumer Protection Director Samuel Levin said in a statement. said. “Companies that use coercive techniques that harm consumers can expect to hear from the FTC.”
FTC cracks down on TurboTax
The lawsuit against H&R Block comes just a month after the FTC cracked down on TurboTax maker Intuit Inc., alleging the tax preparation company misled consumers through advertisements for “free” tax products and services. . In fact, the FTC said the vast majority of consumers don't qualify.
FTC orders Intuit to stop advertising free products and services unless they are free for all consumers or the company discloses in the ads the percentage of consumers who do not qualify for the free offer. Ta.
Intuit spokesman Derrick Plummer said in a statement that the opinion is “seriously flawed” and that the company is appealing the FTC's decision in federal court.
“There are no financial penalties associated with the FTC's order, and we do not expect any material impact to our business,” Intuit said in a statement. “Intuit is always committed to being clear, fair, transparent and free of charge to our customers.”
This isn't the first time TurboTax has found itself in trouble.
Last May, about 4.4 million people received checks from TurboTax after 50 states reached a $141 million settlement with the FTC for years of excluding low-income Americans from free tax filing services. Most customers received $30, but those who applied for three consecutive years received up to $85.
In New York State alone, Intuit paid $5.4 million to more than 176,000 people who were tricked into paying to file their federal tax returns, according to New York Attorney General Letitia James.
IRS offers free filing options
If you're looking for options to file your taxes for free, the Internal Revenue Service offers several services to taxpayers that simply sign up online.
For example, if your adjusted gross income in 2023 is $79,000 or less, you can use IRS Free File to file your federal tax return for this season. Those who don't qualify can simplify the tax filing process with free file-fillable forms.
read more: 7 ways to file your taxes for free
The IRS is also piloting a new fax filing service known as Direct File for easy filing. The pilot program is available to people who lived in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming in 2023.
Taxpayers who are not eligible for the IRS Direct File program include those with gig work or business income, or taxpayers who receive itemized deductions such as the Child and Dependent Credit, the Savers Credit, and the Insurance Premium Tax Credit. The IRS noted that this includes taxpayers who receive deductions such as. .
Gabriela Cruz Martinez I'm a personal finance and housing reporter for Yahoo Finance. Follow her on X @__Gabriela Cruz.
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