H&R Block is sending $25 prepaid debit cards to the customers affected by a tax-filing glitch related to education tax credit claims.
This past tax season, hundreds of thousands of Block customers found their tax returns delayed, thanks to changes in Form 8863, “Education Tax Credits,” by the Internal Revenue Service, which added extra questions to the form and required tax software to answer them with N for No and Y for Yes (see 600,000+ Tax Refunds Delayed by Education Credit Glitch). A large proportion of the delayed tax returns were filed by H&R Block, and Block president and CEO Bill Cobb apologized for the problems last month. A number of lawsuits were filed by Block customers, who also posted angry messages on Block’s Facebook page. The IRS had initially estimated that it would take six weeks for the affected taxpayers to receive their refunds, but it later shortened the estimate to two to four weeks (see IRS Shortens Delays for Education Tax Credit Refunds).
However, the delays affected Block’s business this past tax season, and the company’s stock plunged approximately 11 percent Thursday after Cobb admitted that the Kansas City-based tax prep giant processed fewer returns this year than last year. The company serviced 22 million tax prep clients in the U.S. through April 18, which was 190,000 fewer than last year, representing a 0.9 percent decline from the previous tax season.
As a concession to customers affected by this past tax season’s delays, Block offered to provide them with a $25 Emerald Card gift card. The Emerald Card is Block’s own prepaid debit card brand that it offers in partnership with MasterCard.
“This past tax season has been like no other in recent memory,” the company said in a statement Thursday forwarded by spokesman Gene King. “The late passage of additional tax legislation and subsequent delay in the issuing of all tax forms pushed the beginning of the e-filing season back almost two weeks to the end of January. This alone caused a refund delay for close to 18 million taxpayers who usually file in January and receive a refund by early to mid-February.”
Block noted that the IRS has reported it has cleared nearly all the tax returns impacted by the Form 8863 processing delay. “We are confident more than 90 percent of our clients impacted by the form delay have either received their tax refund or received notice of a possible refund date,” said the company. “For those who are experiencing a longer delay, it is possible the IRS has identified additional issues with the return.”
Block acknowledged that the delays “frustrated and inconvenienced” its customers.
“H&R Block appreciates that the issue involving the filing of Form 8863 this past tax season may have frustrated and inconvenienced impacted clients,” said the company. “H&R Block recently sent those clients who had their tax returns prepared and filed in company-owned locations its sincerest apologies and a $25 Emerald Card gift card to account for any processing delay and express thanks for their patience in this matter.”
“These clients can rest assured their tax professional prepared their tax return accurately and the tax refund was never in jeopardy due to this issue,” the company noted. “The problem was a system disconnect in processing the form that unfortunately further delayed the return. This delay was not caused by something the tax professional did—or did not do. Once the company became aware of the issue, it worked diligently on the clients’ behalf with the IRS to expedite the processing of those returns. By working with the IRS, most clients ultimately received their refund more quickly than originally expected. H&R Block serves approximately 15 million clients in its offices and strives to provide consistent quality client service. Nevertheless, we will not stop working to improve that experience for all of our clients.”