Tax season is a busy time for H&R Block ( HRB). But now the nation's largest tax preparation firm has something else to worry about: the wrath of New York Attorney General Eliot Spitzer.

The New York prosecutor filed a civil lawsuit on Wednesday charging H&R Block with fraudulent marketing of its individual retirement accounts. The lawsuit alleges that the Kansas City, Mo.-based firm "steered hundreds of thousands of its clients, including almost 30,000 New Yorkers," into IRAs that were "virtually guaranteed to lose money."

Spitzer's lawsuit contends the IRAs were a bad investment opportunity because they contained hidden fees and offered low interest rates.

The lawsuit is the latest attack by Spitzer on the financial services industry. But unlike other Spitzer suits, which have targeted large-scale abuses on Wall Street and in the insurance industry, the action against H&R Block is aimed at a single company.

News of the lawsuit, however, was having serious consequences for H&R Block's stock. In midday trading, the stock was down $1.56, or 7%, to $20.44.

"The conduct described in today's complaint is particularly appalling because many of those hardest hit were working families who struggle to save," said Spitzer, who is seeking the Democratic nomination for New York governor. "Instead of providing these families with accurate information that would have allowed them to make informed choices, H&R Block steered them into retirement accounts that actually shrank over time."

The civil complaint cites internal documents showing that H&R Block's senior management knew that many of its customers were losing money on their Express IRAs. One email is from a district manager to H&R Block CEO Mark Ernst, complaining about the impact of the IRA accounts on customers.

It's been a rough few months for H&R Block.

Last month it reported disappointing third-quarter profits and reduced its full-year earnings guidance. Last August, the firm said its auditor found a "material weakness'' in the firm's accounting for income taxes.