The Federal Trade Commission recently filed an administrative complaint against H&R Block, accusing the company of deceptively marketing free filing products to consumers who did not actually qualify for them. The complaint alleges that H&R Block made it difficult for users to downgrade from paid products to free ones by using tactics such as “data wiping,” which deleted in-progress tax return information and forced users to start over from scratch. This obstacle course of tedious challenges was designed to pressure consumers into overpaying for the company’s products, according to Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
H&R Block’s marketing strategy seems to prioritize upselling customers to more expensive products rather than providing transparent pricing and value. While downgrading required contacting customer support, product upgrades happened seamlessly, making it easier for the company to push consumers towards higher-priced options. Despite the allegations, Dara Redler, the chief legal officer of H&R Block, defended the company’s practices by stating that consumers could downgrade to less expensive DIY products through multiple mechanisms. However, the overall process seems designed to make it challenging for consumers to access the free filing products they were promised.
Consumer advocate Ed Mierzwinski from U.S. Public Interest Research Group praised the FTC for taking action against H&R Block and Intuit for misleading and deceptive practices related to free tax filing products. This marks the second FTC action in recent times against tax filing software providers, highlighting a pattern of marketing practices that may not align with consumer rights. Intuit, the maker of TurboTax, previously faced FTC scrutiny for similar deceptive advertising practices aimed at upgrading users to premium products instead of offering truly free options.
Despite the challenges posed by companies like H&R Block and Intuit, consumers have other free tax filing options available. The IRS offers a Direct File pilot program in 12 states that provides limited free filing for certain taxpayers by mid-March. Additionally, the IRS Free File program offers free guided software for filers with an adjusted gross income of $79,000 or less for 2023. These alternatives can provide consumers with a more straightforward and transparent way to file their taxes without the deceptive marketing tactics employed by some tax software providers.
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