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Tax prep companies accused of defrauding tax filers

Two leading tax preparation companies that many California taxpayers routinely turn to for their annual tax-filing needs, Intuit-owned TurboTax and H&R Block, have been accused of deceptive business practices. This is according to two separate lawsuits filed in early May of 2019. Both companies are accused of violating the state's unfair competition law.

Each company provides access to software designed to help tax-filers prepare their state and federal returns online. The complaints involve the companies' free filing options. Under an agreement with the Internal Revenue Service, both tax prep companies agreed to make a free version of their software available to individuals earning less than $66,000 a year. The Los Angeles attorney pursuing action against Intuit claims that the company lures low-income customers to a low-quality free version of its software that is essentially useless unless filers have simple returns. The company also prevents references to its free edition from showing up on search engine results pages.

H&R Block is accused of deceiving low-income consumers into paying for unnecessary tax-filing products. The complaint further contends that the company's customer service staff purposely directs filers to paid services instead of helping them find available free options. The complaints against both companies claim they purposely hide their free tax filing services from consumers. If the suits are successful, users who were eligible to file for free during a certain period may receive restitution money. A spokesman for Intuit denies the allegations. H&R Block has not yet commented on the lawsuit.

Both complaints mention reporting from an investigative news organization, so a business litigation lawyer may question the accuracy of this information. Another strategy an attorney might suggest is using internal facts to dispute allegations believed to be unfair. Intuit, for example, claims that more people have filed their taxes for free with their software than all other online tax prep companies combined.

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