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H&R Block has agreed to a $7 million proposed settlement by the Federal Trade Commission, following a lawsuit filed against the tax filing service by the agency in February.
The FTC accused H&R Block of deceptively marketing its do-it-yourself tax filing services as free to customers who didn’t qualify for its Free Online tier. And even if they did qualify, H&R Block nudged users into upgrading to paid tax-filing products they didn’t need.
“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,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement.
The $7 million payment will be used to pay customers impacted by the H&R Block’s business practices, according to the FTC.
Similar to FTC’s legal battle with TurboTax, H&R Block will be required to disclose in its free advertising the “percentage of taxpayers who are eligible” for the tier or if the “majority of taxpayers do not qualify.”
“H&R Block prides itself in providing consumers with quality online tax preparation products, which has never been an issue in this matter,” an H&R Block spokesperson told CNET in an email. “We will continue to work through this process with the Commission.”
Read more: TurboTax Can’t Call Its Services Free Anymore, Unless They’re Free to All
H&R Block software changes in 2025 and 2026
As part of the settlement, H&R Block will implement changes to its software by 2026 to fix a few pain points of using the service.
Previous versions of H&R Block software made it difficult for customers to downgrade from a paid tier to its free service. If you were to start your return with H&R Block Deluxe (which currently costs $55 for a federal return and $49 per state return) and realize you can file for free, you’d have to call H&R Block to downgrade or contact a customer service agent via live chat.
If you were to reach out to customer service and downgrade, you’d have to start your tax return over — and the information you already entered wouldn’t be saved.
Starting on Feb. 15, 2025, H&R Block will be required to allow customers to downgrade tiers without needing to contact customer service. This includes providing an “easily noticeable and always available way” for consumers to downgrade online, the FTC said. By 2026, H&R Block will also have to return customers to the same point of their tax return after downgrading so they can continue.
