Big name tax preparation services are a waste of money
Filed under: Ripoffs and Scams, Tax
You need your personal taxes done and they're not that complex, so you think you'll just run right over to H&R Block, Jackson Hewitt, or some other tax preparation franchise. It's easy and they must be good or they wouldn't have so many locations and be in business so long, right?Wrong. The fact of the matter is that you're taking a big risk if you have your taxes done at one of the large tax return sweatshops or a similar smaller service. These companies have a few major drawbacks that most consumers are unaware of:
The prices they charge are generally too high. Even the simplest of tax returns can cost you well over $100, and that type of fee is just too much. Add in some things like a rental property or an in-home business, and watch your tab for the tax return run up fast.
The name of the game at the tax return franchises is turning out as many tax returns as fast as they can, at the lowest possible cost. This means that most of the employees are inexperienced data entry clerks who really know next to nothing about the tax law. They couldn't spot an opportunity or a problem with your tax situation if their life depended on it. Do you really want to risk having your taxes prepared by someone who took a day-long class to learn how to enter data into a computer program?
These places make a lot of their money by selling you other products, like refund anticipation loans or other nifty-sounding services to get your money to you fast. Selling these worthless products is how they really make their money. The fees for these things are way too high and not worth the cost. If you file your taxes electronically and request direct deposit of your refund, you should have your money from the IRS within a few weeks. Why waste money on a service you don't really need when you can get your refund so quickly for free?
What's the alternative to the H&R Blocks and the Jackson Hewitts? If your tax situation is very simple, you can purchase tax software to do the taxes on your own. If you're not comfortable with that, look for a local Certified Public Accountant who does lots of income tax returns. They are generally much more experienced with taxes and can be priced very competitively.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
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Reader Comments (Page 1 of 1)
12-05-2007 @ 11:39AM
Josh Smith said...
This is great advice, we currently use a local CPA who we end up paying less than the sticker price of most tax programs. Granted our taxes appear to be rather simple which is why we get a great rate.
For me the time saved on having it done is worth the price paid, much like having your oil changed at a local shop may be cheaper than the DIY route after you factor in the value of your time.
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12-06-2007 @ 2:56PM
Jeff said...
Yah I got burned by H&R a couple years back. Not by a lot, but enough to learn a lesson. I brought in my tax return expecting to get a refund because I was making under 40k at the time. Had to deal with an idiot punching the computer keys one at a time with her pointer finger and seemed to know diddly sqwat about taxes. 45 minutes later I owe them a 100 bucks and I owe the government $125! I brought it to my father and he said there was errors all over the place and so I went back to H&R the next day and the manager didn't want to help me out at all. I just wanted to have someone look over some notes my father made and they said there was nothing they could do because it was already submitted. I hate losing money. :(
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12-07-2007 @ 9:05AM
Sharon Reagan said...
I work for H&R Block and I have gone to school more than one day, We have to keep up with the tax laws. Not everyone can go to aCPA or do they want to.
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12-07-2007 @ 9:05AM
Timothy said...
True...it's a little more expensive to go to them. I personally buy their programs and do it myself. Basic taxes were taught in my High School Government Class. I only ask for help when I itemize or have complicated tax conditions and don't know the laws. One point this story failed to mention is what happens if the taxes are submitted incorrectly and you are penalized by the IRS or audited. Places like H & R Block warrant their service and pay for the mistakes. If you get audited they are there for you to use.
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12-07-2007 @ 9:06AM
Dan Wade said...
All of the comments on this blog have some degree of merit. The large tax franchises are headed for trouble, and more especially in light of the problems with H&R Block in selling their IRA accounts to clients; Jackson Hewitt via their fraud returns resulting in the forced closing by the U.S. Treasury Department of many of their offices from the east coast through parts of the mid-west. The title CPA is a misnomer, unless, of course, the CPA specializes in taxes, which, by the way, are far more complicated than regulations set forth for the medical profession. The best thing anyone can do is look for an Enrolled Agent (EA) in their area or on the national NAEA website - these people have been tested by the IRS as to proficiency in tax via a rigorous and comprehensive exam which is completely tax oriented, and will not be licensed by the U.S. Treasury Department until they pass it. The annual requirement for continuing education is strict, as well, not to mention the canons of ethics requiring strict adherence to. Trust me, tax law (to include even the basic tax returns) ain't easy, as I can attest to - I have been a practicing EA for many, many years, and the holder of multiple designations and credentials -all in tax. It never gets any easier, and it never will.
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12-07-2007 @ 10:55AM
Tracy Coenen said...
Sometimes people working under a chain name have great credentials and experience: EAs, CPAs, or tax preparers with years of experience and education. Unfortunately, those people are too few and far between for consumers to take a risk by walking into the tax preparation service. The vast majority of the employees are what I would call under-trained, and I don't think the risk of ending up with one of those preparers is worth it for the taxpayer.
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12-07-2007 @ 1:26PM
Nancy Holman said...
Not always true. Most times CPAs charge alot more than those tax prep companies. CPAs specialize in accounting not taxes. Tax offices specialize in taxes. The key is to ask for an experienced tax preparer. If all you have is a W-2 or two or three and maybe a few children, most anyone can do them, otherwise you need an experienced preparer. You are more likely to get an experienced preparer in late FEB or March after all the non-experts have been weeded out.
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