Groups Say H&R; Misuses E-Filing Data

Times Staff Writer

Consumer groups are complaining that tax preparation giant H&R; Block Inc. is using personal information gathered via the U.S. government’s free electronic tax-filing program to market products.

H&R; Block is using the program “to gather the most intimate financial details that a consumer can have -- information on a tax return -- so they can sell these taxpayers all sorts of unrelated products,” Jean Ann Fox, director of consumer protection at the Consumer Federation of America, said Tuesday.

“This is a gross violation of the privacy of these taxpayers.”

Fox’s group belongs to a coalition that wrote Pam Olson, the Treasury Department’s assistant secretary of tax policy, on Monday to protest “the deprivation of privacy protections” on the H&R; Block Web site where people can file free electronic tax returns with the Internal Revenue Service.


Coalition members include the National Consumer Law Center, Consumers Union, U.S. Public Interest Research Group and the Electronic Privacy Information Center.

Consumer groups were skeptical of the IRS teaming up with H&R; Block and other tax preparation companies to make free electronic filing available to a broad swath of taxpayers, fearing that the firms would use it as a way to market fee-based services to taxpayers.

The groups say taxpayers who use the H&R; Block site are confronted with pop-up adds offering mortgages, fee-based tax services and refund loans. The groups complain that users are required to accept a license agreement that allows their personal tax information to be collected by H&R; Block and possibly used for marketing purposes.

An H&R; Block official said the groups misunderstand the company’s policy. Consumers who see the pop-up ads have gone through two consent screens, accepting both.

Only the license agreement is mandatory; the second “consent to receive personalized tax tips” screen is voluntary and is what generates the marketing pitches, the official said.

Nathaniel Norton, a legal aid lawyer from Weslaco, Texas, says he accepted H&R; Block’s license agreement, which was on the first screen. Norton didn’t think much of it, he added, until he typed his mortgage interest information into the tax program and suddenly saw an offer for a refinancing loan through an H&R; Block affiliate. And he said he had to respond to the pop-up offer before he could continue filing his tax return.

Along the way, the program also warned Norton that he could be missing tax breaks worth hundreds of dollars and offered another premium service -- for about $20 -- to have a tax expert review his return.

H&R; Block spokesman Tom Linafelt said consumers can decline to receive the tips and offers, without jeopardizing their ability to free file.


He said the mortgage offers for fee-based tax advice or other financial services, such as individual retirement accounts, are sent only to those who also click affirmatively on a second screen titled “Consent to receive personalized tax tips and information.”

The Treasury Department didn’t respond to questions about the H&R; Block site. The department said in a written statement:

“Unauthorized use of taxpayer information is a criminal offense.

“We appreciate the comments we receive on the Free File initiative, take them seriously, and have the IRS review them to ensure that there are no violations.”