The Company Responds — Sort Of 

A Block spokeswoman declines to address many questions, but answers a few via e-mail.

H&R Block declined to be interviewed regarding its training, hiring, and compensation policies. Responding partially to a series of questions via e-mail, spokeswoman Jennifer Foster wrote that the company has strict guidelines for hiring and relies upon a seasoned, experienced staff.

"Our tax professionals have an average of eight years of service and more than 400 hours of training," she wrote. "H&R Block typically hires less than one-third of the people who enroll in our Income Tax Course."

Foster noted that all California tax professionals must have a "license" from the California Tax Education Council. She declined to state whether Block instructors help students pass their tests by sharing answers with them, but said that new California tax preparers must complete at least sixty hours of coursework at Block or another "approved curriculum provider."

"A new California tax professional must take 115 hours of training before seeing a client, and returning tax professionals are required to take 50 hours of continuing education each year," she wrote.

Foster also declined to state how much money entry-level tax preparers make or how compensation is computed, but said that Block offers "competitive compensation" and "fourteen levels of certification," allowing employees "to increase their skill level as well as their compensation." Employees receive a contract that clearly delineates their compensation, she added. Those who are hired as "tax professionals" may enroll in an unlimited number of Block's 145 advanced-level tax courses for a $20 fee.

She indicated that all H&R Block employees are required to read and comply with the company's "Code of Business Ethics and Conduct." Employees should report to their supervisor if these rules are not being properly followed, she added.

Presumably to minimize the likelihood of employee errors, Foster wrote that Block tries to match its entry-level tax preparers with less-complex tax returns. "The company's protocol is for more complex returns to be reviewed by a second tax professional, and if an associate observes that the protocol is not being followed, he should report it to his supervisor," Foster wrote.

According to Block's web site, the company's Peace of Mind guarantee is "a smart way to make sure you're covered no matter how complex your tax situation." In other words, for $29, such customers are essentially buying insurance against potential blunders. Block isn't the only tax preparation company offering such error-insurance to their customers. Jackson Hewitt Tax Service Inc., which boasts 6,800 offices around the country, has a virtually identical guarantee called the "Gold Guarantee."

H&R Block is currently facing litigation involving both this Peace of Mind guarantee and its separate Refund Anticipation Loan services, federal securities filings show. It's certainly not the first time either add-on has seen a courtroom.

In 2003, H&R Block and 41 states and Washington DC reached a settlement called an "Assurance of Voluntary Compliance or Discontinuance," that would offer refunds to customers who paid for the Peace of Mind guarantee without being told by employees that the service was optional.

In the same year, Block faced another lawsuit in which plaintiffs claimed that the Peace of Mind service constituted fraud (for selling insurance without a license), unfair trade practices (for charging customers without telling them it was optional), and a breach of their legal obligation to the plaintiff. The outcome of that case is still pending.

H&R Block also has faced numerous cases regarding its refund loan services, successfully defending against some of them and losing others. One of the more substantial suits took place in Texas in 2003, and resulted in a $43.5 million-dollar settlement on behalf of the plaintiff.

Just last month, California's attorney general filed a similar injunction against H&R Block claiming that its loan services are misleading.

Nor is H&R Block the only tax preparation company with lawsuits on its hands. A number of the nation's leading tax-preparation companies are currently under scrutiny for similar business practices. H&R Block, Jackson Hewitt, and Liberty Tax Service all have faced or are currently facing lawsuits for misrepresenting their refund-anticipation loans to customers by advertising them as being less risky than they actually are.

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