MADISON - ST. CLAIR RECORD

As tax providers across the nation prepare to put their busy season behind them today, one has found itself named as a defendant in a class action lawsuit in southern Illinois’ federal court.

Two women late last week filed a complaint in the U.S. District Court for Southern District of Illinois against H&R Block Inc., claiming the provider’s erroneous preparation of tax returns that included forms for education credits resulted in delayed refunds.

Ursula Millett and Jeanine Sanlorenzo brought the suit on behalf of themselves more than 100 potential class members who had federal income tax returns including Form 8863 for the year 2012 that were filed before Feb. 22 and prepared by the defendants.

Form 8863 according to the complaint, “is a document that can be completed by a taxpayer to claim ‘education credits’ based upon eligible student expenses paid during the taxable year.”

The suit, which also names HRB Tax Group Inc. and HRB Technology LLC as defendants, explains that taxpayers can claim either the American Opportunity Credit or the Lifetime Learning Credit, which provide eligible taxpayers credits ranging between $2,000 and $2,500.

Previously, the suit states, “lines determining eligibility for tax credits in the Form 8863 could be left blank and still indicate to the Internal Revenue Service (‘IRS’) that the taxpayer qualified for the student tax credit.”

The IRS began to require certain information be entered in the eligibility lines at the start of the 2012 tax season, but the suit asserts that “H&R Block's tax software continued to permit the lines to be left blank, which has resulted in the delay of thousands of refunds.”

"According to the IRS, about 10 percent of the 6.6 million (i.e. 600,000) tax returns using Form 8863 were affected by the error,” the suit states. “Based on the fact that other tax preparation providers such as Turbo Tax filled out the same form correctly, the overwhelming majority of the erroneous returns were filed by H&R Block.”

Millett, an Illinois resident, patronized an H&R Block office in Belleville and Sanlorenzo, a Pennsylvania resident, went to the provider’s Philadelphia office.

Both women claim they paid the defendants to prepare and file their 2012 returns and “opted out” of their arbitration agreement. Their suit asserts their returns were filed Feb. 4, but that they didn’t receive refunds until nearly two months later on March 27.

In mid-March, the complaint alleges, some H&R Block customers received a mass email that explained the IRS had confirmed an issue related to Form 8863 and that refunds could be delayed for another four to six weeks.

Shortly after that email, the suit states that H&R Block CEO Bill Cobb issued a public statement that acknowledged “we made a mistake when the tax return was sent to the IRS” and apologized to customers.

“Despite this admission, Defendants did not offer compensation to Plaintiffs or any Class member,” the suit asserts. “Nothing Plaintiffs or any Class member did could have contributed to the error, which was the sole result of the conduct of H&R Block Inc., and its subsidiaries.”

As a result of H&R Block’s “mistake,” the two women claim they and the class “have suffered and will continue to suffer substantial monetary damages including” the amount they paid for the tax provider’s services, as well as what they had to pay third parties to correct the defendants’ errors.

The suit includes claims for breach of contract and negligence, as well as violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law and the Missouri Merchandise Practices Act.

It seeks damages “including compensatory damages, consequential damages, treble damages, punitive damages, and any other damages provided under relevant laws,” in addition to litigation costs, attorneys’ fees and pre- and post- judgment interest.

Edward Wallace, Kenneth Wexler and Amy Keller of Wexler Wallace LLP in Chicago and Sherrie Savett and Eric Lechtzin of Berger & Montague in Philadelphia submitted the complaint on the plaintiffs’ behalf.