Los Angeles City attorney Hydee Feldstein Soto has revealed that her office settled a civil enforcement case against HRB Digital LLC and HRB Tax Group, Inc., known collectively as H&R Block, operators of online tax preparation and filing services. The announcement was made on Jan. 29, the first day of the 2024 tax season.
According to the settlement, up to $1.6 million in restitution will be given to tens of thousands of California residents who unfairly paid H&R Block to file their federal tax returns when they were eligible to file their returns for free.
“With tax filing season starting today, this settlement is a reminder that millions of taxpayers are eligible to file their federal tax returns free of charge,” Soto said. “My office will always work to protect California consumers, and I am pleased to be able to return $1.6 million to people who shouldn’t have paid for a free service.”
The lawsuit was filed in 2019 when the city attorney’s office alleged that H&R Block engaged in a slew of fraudulent, unfair and deceptive business practices. The lawsuit claimed that H&R Block intentionally steered customers eligible for free filing services to H&R Block’s paid online commercial products. For example, H&R Block told customers they “needed” to purchase a paid product to file their tax returns and limited customer access to the H&R Block Free File product.
Attorneys in the Public Rights Branch of the LA City attorney’s Office oversaw litigation for the suit. The Public Rights Branch specializes in initiating civil enforcement actions on behalf of the people of California. These actions aim to uphold public rights across various domains, such as addressing fraudulent, unlawful or unfair business practices, promoting environmental justice, safeguarding consumer interests, managing nuisance abatement and handling intellectual property.
Since 2003, the IRS’s Free File program has allowed lower-income Americans to prepare and submit their federal tax returns at no cost. Yet, its utilization is minimal. In 2022, reports indicated that over 110 million people, constituting 70% of eligible taxpayers, were qualified for the program, yet only 2% chose to file their federal returns through the IRS initiative. The city attorney’s legal action asserted that the diminished usage was partly a consequence of H&R Block employing fraudulent, unfair and deceptive practices.
Taxpayers with an adjusted gross income of $79,000 or less in 2023 can use IRS Free File for their federal tax return. The Franchise Tax Board also offers free state tax return options to eligible filers in California.
Following the settlement, a third-party administrator is set to contact eligible customers to receive restitution and discuss their options for receiving payment.
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