March 19, 2013

H&R Block tax filing mistake leads to lawsuit

The suit, filed in U.S. District Court in the Eastern District of Michigan, seeks class action status and claims more than $5 million is at stake.

Two H&R Block customers have sued the company over its recent tax filing mistakes that are delaying thousands of refunds.

The suit, filed Tuesday in U.S. District Court in the Eastern District of Michigan, seeks class action status and claims more than $5 million is at stake.

H&R Block has acknowledged that customers’ refunds are being delayed because it failed to check boxes on a tax form needed to claim education tax credits. The credit lowers a filer’s tax bill.

An H&R Block spokesman said Tuesday the Kansas City-based company would not comment on the suit but was working with the Internal Revenue Service to “expedite” processing of clients’ returns.

“We continue to contact those impacted directly as clients report funding dates and change in refund status since the IRS began processing the returns,” spokesman Gene King said in an email.

Block’s error didn’t affect customers’ taxes but has disrupted processing of their returns by the IRS and may delay their refunds for several weeks. The IRS has said the errors involved about 600,000 returns, but not all of those were Block customers.

“This was our mistake — and I sincerely apologize,” Block chief executive Bill Cobb said in a March 15 statement.

H&R Block, however, has not offered any compensation to clients despite advertising 100 percent guarantees, the 10-page lawsuit asserted.

Michigan resident Amy Hamilton and Arthur Green, whom it described as a temporary Michigan resident from South Carolina, sued to recover the fees they paid Block and compensation for the delay in getting refunds. If granted class action status, the suit would seek similar recovery for all similarly situated Block customers.

“The amount in controversy on a classwide basis, exclusive of interest and costs, exceeds $5 million,” the lawsuit said.

In the lawsuit, the two customers charged Block with breach of contract and negligence. The suit also seeks action under the Michigan Consumer Protection Act and the Missouri Merchandise Practices Act.

H&R Block first acknowledged the problem on its Facebook page, drawing many critical comments from aggrieved customers as well as from public relations experts for not reaching out more broadly to customers. Block has since said it is reaching customers directly.

Customer complaints extend beyond the delay in getting their refunds, though some said they needed the money for tuition or books. Unprocessed tax returns also make it difficult to complete the Free Application for Federal Student Aid.

The tax form in question requires the filer to check either a box marked yes or one marked no on four lines of the form. Previously, the IRS considered two blank boxes to mean no but this year needed a specific response.

Shares of H&R Block lost 2 cents Tuesday and closed at $27.60.

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