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How to Address H&R Block About "Mistake" on 2020 Taxes

-- About a year ago a low income client went to H&R Block to have her taxes done.

-- The client turned 65 in February, 2020.

-- The client was Head of Household, supporting her elderly mother.

-- The client had one month of marketplace insurance. The client had a properly completed Form 1095-A in her possession.

-- H & R Block's software oddly put $650 down as the amount the client owes for excess advance payment of PTC.

-- The $650 is the repayment limit for HoH published in the 2020 tax instructions.

-- The client had $4000 withheld, per a 1099-R.

-- The H & R Block generated form 1040 shows the IRS owes the client a refund of $3350 ( = 4000 - $650).

-- H & R Block billed the client $300.

-- H & R Block and the client had a written agreement that the client would have her refund sent to H &R Block. Then H & R Block would write a check to the client for $3350 - $300 = $3050.

-- Many months later, H & R Block gave the client her check for $3050.

-- H & R Block also failed to file a state return (so H & R Block says, anyway). Had H & R Block done so, the taxpayer would have received a $50 low income credit from the state.

Concerns:

-- Per pandemic relief legislation and the IRS, no repayment is required in 2020. See

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-- I put the client's 2020 info into Taxslayer software to see what Taxslayer would do.

-- The Taxslayer Form 8962 shows: Line 27 = an excess advance payment of PTC of $195.

Line 28 = blank.

Line 29 = blank.

-- The Taxslayer Form 1040 correctly shows the client owing no PTC repayment and states the IRS owes the client a refund of $4000.

Is it possible that H & R Block e-filed the client's 2020 return; the IRS saw the "error"; and issued a refund of $4000 to H & R Block on behalf of the client? Then H & R Block took not only its $300 but also the $650? Is this perhaps even likely?

I will accompany the client to H & R Block in the next several days. I intend to have a short letter with the facts, signed by the client. The letter will conclude with a request to refund the client first, $650; second, $300 for all the trouble the client has been put to; and third, the amount of the state refund.

I have doubts that a VITA volunteer can even amend the 2020 H & R Block return, since I think it's possible H & R Block pocketed the $650 that should have gone to the innocent, low income client.

If H & R Block refuses, I will report back.

I certainly have some ideas, including elevating the letter to a threat (lite version) that H & R Block has left the client no choice but to write the IRS and the BBB with her concerns.

I am also in touch with a local university law school free tax clinic (staffed by law students overseen by attorneys) that has helped out a number of VITA clients in unusual situations.

Any other suggestions for now?

Reply to
honda....
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The suspension of APTC repayments for 2020 was in the American Rescue Plan Act, which wasn't signed until March

11, 2021. Is it possible that your client's return was filed before then, or at least before H&R Block was able to revise their software for the retroactive provisions in the new law?

The 2020 TaxSlayer software that you are using now was certainly updated long ago for the retroactive change. I'm sure H&R Block's 2020 software was also updated long ago, but perhaps not until after your client's return was filed.

It's possible. The IRS said they would automatically refund any repayments of excess APTC that were filed before the new law was passed. H&R Block might have mishandled the additional refund. Maybe their records just indicated that they owed the client $3,050, and they didn't notice that the refund was more than expected. Or, depending on the timing, the additional refund might have been sent as a separate payment, and H&R Block failed to recognize what it was and pass it on to the client. Whatever happened, I think it's more likely due to incompetence or innocent confusion about adapting to the retroactive change in the law, rather than malfeasance.

No amended return should be necessary. The IRS should have made the adjustment automatically. Maybe when you and the client complain, H&R Block will realize what happened and give the client the refund without any fuss. Maybe they've even already seen other cases like this and are aware of the problem.

The client can get a Tax Return Transcript and a Tax Account Transcript, or check her IRS account online, and see what was actually filed and what payments were sent. If she can't deal with the process of establishing an online account, she can get the transcripts by mail or request mailed transcripts by phone.

Bob Sandler

Reply to
Bob Sandler

Bob Sandler,

I am much obliged for your thorough answer. The client and I (independent of VITA) plan to meet with H&R Block as soon as we can get an appointment. When I get my head above water, I will try to remember to post an update. Thank you again.

Elle

Reply to
honda....

To respond to Bob's earlier question: The client's 2020 tax return is dated in early February, 2021.

The meeting with H & R Block today went well (and I think I set the bar pretty high).

The client did a good deal of the talking, calmly and politely. The client and I worked from a letter I prepared, reading sections aloud. The H & R Block representative was a senior person (based on her title); checked everything in the software carefully; and appears to me to have been quite honest. She agree about the mistakes. She said what happened may be as Bob suggested: The refund of the $650 may have gone into H&R Block's black hole of books. Without prompting, she explained how she would follow up with the H&R Block finance yada department. The client is seeking IRS transcripts at this point, both via the form that one can fax or mail in, and also via the web site. H&R Block faxed the form to the IRS. The client has not quite broken through the mighty walls of the IRS transcript web site. Still, she made good progress today and will re-attempt with a young relative soon.

Most importantly and without prompting, the H & R Block representative commented on the inappropriateness of the bill and immediately saw mistakes. Ten minutes later when a gross mistake on the state return was also pointed out, and without any prompting from the client or me, the H&R Block representative said she was going to try to get the client a full refund.

The H&R Block rep also again commented about how the Block employee who did the return is no longer with Block. I think the look the rep had on her face was a total tele- graph that Block does not think much of this former employee.

I'll feel better when the money is in the client's bank account. For now I can say Block's rep was totally professional and knowledgeable today, so so far, so good.

Reply to
honda....

Update:

Per the signs on the client's IRS tax transcript and urging from H&R Block, the client ultimately properly checked her bank account. It turns out the IRS/Treasury (relatively promptly) had direct deposited the $650 into the client's bank account way back in May, 2021. In other words, the IRS promptly caught H&R Block's mistake. I think the client, elderly, of humble means and limited technological skills was very sad about her mistake. She was apologetic and humble. I think she took no further steps. Perhaps this was a lesson for me as well about how I should urge clients to check their bank statements.

Reply to
honda....

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