H&R Block will pay $7 million to settle a Federal Trade Commission (FTC) lawsuit over deceptive practices related to its online tax filing services. The settlement, announced on Thursday, will require significant changes to the company’s operations, benefiting consumers who use the company’s do-it-yourself tax filing products starting in the 2025 tax season.
The FTC’s action stemmed from claims that H&R Block misled consumers by advertising its tax filing products as “free” when most users could not actually file at no cost. The agency also found that H&R Block made it difficult for consumers to downgrade to cheaper tax filing products after they had inadvertently selected more expensive options. The company’s practices included requiring customers to contact customer service to make the downgrade and deleting previously entered tax information when downgrading, causing frustration and additional time spent re-entering data.
“American taxpayers who seek tax-filing help should be able to choose the services they need—and know the truth about how much they’ll pay,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC’s action today will help lower the stress and expense of tax season for millions of taxpayers.”
Under the terms of the proposed settlement, H&R Block will make several key changes:
- Easier Downgrades: Starting in 2025, customers will be able to downgrade to a less expensive product without needing to contact customer service. The company will also stop deleting users’ previously entered data when they downgrade, ensuring that consumers don’t lose the work they’ve already done.
- Transparent “Free” Claims: H&R Block must clearly disclose the percentage of users who are eligible to file for free or acknowledge that most taxpayers do not qualify for the “free” version of the service.
- Refunds for Harmed Consumers: The company will pay $7 million to compensate consumers affected by its deceptive practices.
The settlement follows an FTC lawsuit filed in February 2024, which alleged that H&R Block made misleading claims about the availability of “free” tax filing options. Many consumers spent time using higher-tier products because the company did not clearly explain which products covered specific tax forms or situations. When these consumers attempted to downgrade, they were met with significant hurdles, including contacting customer service and losing their previously entered data.
By 2026, H&R Block will also be required to implement a system that allows consumers to keep their progress when downgrading, and to provide an easy, always-available way to make changes without needing customer support.
The FTC’s 5-0 vote to approve the settlement is a significant step in ensuring that consumers have fair access to tax filing services. The settlement is now open for public comment for 30 days before it becomes final.
For more information or to submit comments on the proposed settlement, consumers can visit Regulations.gov after the full details are published in the Federal Register.
