Grudge Fight: Jackson-Hewitt Sues H&R Block

It's not a good time to be in the tax return preparation business. For one thing, more taxpayers are using tax software to do their returns. For another, the IRS is offering free electronic filing online. Also, the IRS has teamed up with thousands of non-profit organizations to sponsor free tax preparation sites for elderly and low- to moderate-income taxpayers not comfortable using a computer.

It looked for awhile as though Jackson Hewitt had a leg up on its much-larger rival, H&R Block, which this year lost its contract with HSBC to make refund anticipation loans, something Jackson Hewitt is still able to do.

But now Hewitt has sued Block, accusing it of false and defamatory advertising.

The ads in question claim that two out of three Jackson Hewitt clients who had their returns looked over by Block were due a larger refund than Hewitt had calculated. Hewitt is seeking an injunction to block further airing of the ads, as well as monetary damages.

“We intend to pursue every avenue available to us to stop their campaign of misinformation,” said Jackson Hewitt chief executive Philip Sanford.

The reviews in question are H&R Block's “Second Look Review” service. For $29, Block will review returns prepared by other companies, to see if anyone missed anything. It claims it found additional deductions for two-thirs of its Second Look customers.

Jackson Hewitt says the ads are driving away clients and damaging its reputation, not to mention raising unrealistic expectations among consumers.