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If you purchased the peace of mind policy, then H&R block is responsible up to the dollar limit (currently $5,500) of all additional taxes.
You only have 60 days to contact H&R block regarding their error, so I would take this letter into your H&R block office as soon as possible. They may want to recalculate the return and respond to the IRS.
This is from the H&R block website regarding this service?
After a tax professional completes your tax return, you will have the option to add the Peace of Mind® Extended Service Plan to your return.
If you choose the Peace of Mind® Extended Service Plan option, you will be provided with a receipt that will serve as legal documentation that you have purchased the service plan.
If you receive an audit notice from the IRS or other taxing authority, you must notify H&R Block within 60 days of receipt of that notification. See Peace of Mind® Claims for more details.
H&R Block will pay up to $5,500 in additional taxes assessed by the IRS or any state and local taxing authority resulting from an error by H&R Block. Claims must be filed within 60 days of receiving notice from the IRS other auditing authority. (See Peace of Mind® Terms for more details.)
The policy is good for 3 years, so you are well within the time frame they indicate the coverage is for. They will also cover the penalties and interest.