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Tax Trash Talking Begins: Jackson Hewitt v. H&R Block

February 1, 2011 · 8 comments

It’s trash talk season. The insults are flying. And nooo, I’m not talking about the Super Bowl. I’m talking about tax season.

Jackson Hewitt, the nation’s #2 retail tax preparer service, has filed a lawsuit against H&R Block, the nation’s #1 retail tax preparer service, for making what it called “false, misleading and highly disparaging advertising claims” about the company.

The lawsuit specifically focuses on H&R Block’s “Second Look” ad campaign. In the ad campaign, Block claims that they found errors in two out of three tax returns prepared by Jackson Hewitt.

In a press release related to the lawsuit, Jackson Hewitt chief executive Philip Sanford said, about the lawsuit:

We are extremely disappointed with H&R Block and feel they are doing a significant disservice to U.S. taxpayers with their false advertising claims that are designed to undermine trust in Jackson Hewitt. We intend to pursue every avenue available to us to stop their campaign of misinformation.

Of course, Hewitt’s lawsuit has done exactly what most lawsuits do: it’s made folks like me curious. I don’t recall hearing any disparaging remarks about Hewitt made by Block so I went looking for them (really, Hewitt, is that what you wanted?). I found a terrible (I can’t stress the terrible part enough) commercial from a previous year:

This commercial merely refers to returns prepared by “someone else.”

Next, I poked around trying to find a screenshot of the comments at issue but I couldn’t find any. On Block’s own web site, they currently have the somewhat generic statement:

With Second Look® Review, we found errors in two out of three returns prepared by other retail tax preparation offices.

I’m assuming that more blatantly disparaging comments are out there – somewhere – but I just haven’t seen them. If you’ve seen them, please send them my way. I’d love to see more about what drove the company to file this lawsuit during this time of year. The timing just feels extraordinarily bad from a PR perspective. For more information, the lawsuit is Jackson Hewitt Inc v. H&R Block Tax Services LLC, U.S. District Court, Southern District of New York, No. 11-00641.

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{ 5 comments… read them below or add one }

1 Mary O'Keeffe February 1, 2011 at 10:58 am

Fascinating post, Kelly. I think all returns deserve a “second look.” If the return falls within the scope of VITA certification, taxpayers can bring their return into a VITA site for a free second look.

2 Mike Emeigh February 1, 2011 at 12:50 pm

Full disclosure: I am a Block associate.

There is apparently an ad in this year’s campaign that does menti0n Jackson Hewitt by name in conjunction with the Second Look program. I haven’t seen it but some of my colleagues have.

I do find errors in most of the returns on which I do Second Looks – but I find that neither surprising nor indicative of serious problems at any other tax preparer, retail or otherwise. Second Look customers are generally people with complicated tax situations where the probability of an error is significantly higher than zero from the start. The amazing thing to me is not that we find errors but that we find as few errors as we do.

I’d also add that sometimes when we do find an error it’s because the client reveals information that wasn’t made available to the other tax preparer. That’s not necessarily a *mistake* on the part of the other preparer; a lot of the time it’s because the client didn’t have (or forgot) the information when the original return was prepared.

3 Tim February 2, 2011 at 9:46 am

The commercials this year do refer to Jackson Hewitt by name. As soon as I saw it I knew a law suit was coming.

4 TGMcCallie March 13, 2011 at 8:30 pm

As a tax professional of a MAJOR retail tax prep company, I can vouch for the second look program. The results of this program has created so many ammended returns that the IRS has doubled the time it takes for an ammended return refund to be processed. This has resulted in a tremendous amount of tax benefits that clients are receiving which were overlooked by other tax companies. They are not benefits where the client did not tell the tax person about them but the results of the tax person not giving a thorough interview and asking the client questions about his deductions and dependents.

I have had clients who ammended because the tax person told him he could not count his 25 year old son, who had no income and lived with the client, because he was too old and not in school. The client was really happy with the extra money I was able to get him legally.

Also they had reported a HSA distribution of 900.00 as income on line 21 of his 1040 which was incorrect because it was not taxable at all due to his medical expense.

I am glad that the IRS has made it mandatory for all paid tax preparers to be licenses and meet training qualifications which have I have always had to take the required training or else my company would not renew my contract each year.

In taxes training and tax knowledge is the basis of good tax prep for our clients.

5 Mike Emeigh March 14, 2011 at 12:13 pm

TGMcCallie:

I can also vouch for the success of the Second Look program (as I said above I work for Block). My point wasn’t that it wasn’t successful, but that the program by its nature *should* be successful – because a return that is unlikely to contain an error is also unlikely to be submitted for a Second Look in the first place. Is a taxpayer with only W-2 income, taking a standard deduction, likely to come in for a Second Look? I think not.

If you took *every* return prepared by Jackson Hewitt (or Block, for that matter), I think you’d find that at least 95% of them were prepared correctly. The sample of returns from which the Second Looks are drawn is weighted heavily toward the remaining 5%, and cannot and should not be used to draw any conclusions about the quality of return preparation by the other provider.

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