The Ugly Truth about the Tax Preparation Chains

It is amazing to us that a very large number of people have their tax returns prepared by H&R Block, Jackson-Hewitt, Liberty Tax and other large chain tax preparation offices.  Most of the preparers in these offices are unlicensed, seasonal preparers who possess a minimum level of tax knowledge.  These big chain tax preparation offices even charge about the same amount for a return as we do here at Incompass.

Why settle for drive-through fast food style tax preparation, when you can build a business relationship with us.  Our preparers are highly qualified and licensed, and are available all year long to answer your questions and help you with much more than just tax preparation.

When we review many of the tax returns completed by these big chains, we find obvious errors on the majority of them.  Perhaps it would be understandable, if the big chains were providing a very low cost tax return, but instead, they charge fees similar to many of the more-qualified licensed preparation firms.  The big chains are in fact very expensive, considering the quality of the service they provide and the low level of tax knowledge possessed by their preparers. They charge steakhouse restaurant prices for fast food burger service.

A few years ago the Government Accountability Office (GAO) conducted a study which resulted in a report to Congress about the many errors made by chain preparers.  The GAO sent undercover agents with two different tax scenarios to a total of 19 offices of 5 commercial tax chains, including H&R Block, in a metropolitan area.  All 19 returns contained errors.

If you search the internet you will see that H&R Block, Jackson Hewitt, and Liberty have many complaints and have paid out millions of dollars for legal fees and the settlement of lawsuits for deceptive advertising and other unethical business practices.

The big chains not only make many errors when preparing tax returns, but they also rip-off their customers by enticing them to buy their other over-priced products or services.

A few examples are provided:

NEW YORK, N.Y. (January 4, 2010) – Attorney General Andrew M. Cuomo today announced a multi-million dollar settlement with H&R Block requiring the company to refund fees it charged to low-and middle-income customers nationwide who were enticed into purchasing its fee-laden and fraudulently marketed Express IRA product that was virtually guaranteed to lose money due to a combination of hidden fees and low interest rates.

H&R Block Faces Federal Class Action Over Predatory Loans

Since 1990, Block has defended 22 class-action suits accusing the company of fraud, misrepresentation or breach of fiduciary duty.

H&R Block Settles Class Action Lawsuit for $2.5 million in Pennsylvania.

Liberty Tax Service Faces Class Action Lawsuit

Jan 3, 2011, Columbia, SC (WLTX) – Liberty Tax Service is being sued for allegedly falsifying documents and ripping-off their clients along the way.  Attorney Todd Ellis is among three lawyers representing local plaintiffs in a national class action suit. Liberty Tax had a plan or a scheme to increase their profits by filing false, fraudulent or inappropriate forms.

Liberty Tax Service Loses Deceptive Ad Suit

SAN FRANCISCO (JUNE 22, 2009), BY WEBCPA STAFF

Liberty Tax Service, the third largest tax preparer in the U.S., has lost a lawsuit over deceptive ads.  The ruling last Monday holds Liberty responsible for its deceptive marketing, which included print ads that failed to include disclaimers mandated by law.  The ruling requires the company to pay $1.16 million in civil penalties, $135,886 in restitution and the Attorney General’s costs.

Liberty Tax Service’s print and television ads misled customers by promising “Most Refunds in 24 Hours,” according to California (former) Attorney General, Jerry Brown. In reality, Liberty was selling refund anticipation loans, not a tax refund. Customers had to pay an upfront fee of about $30 plus interest, at a rate that could be as high as 395 percent annually.

Former Attorney General Brown also reached settlements with Jackson Hewitt in 2007 and with H&R Block in 2009 over similar claims (Block settled California RAL suit for $4.85M).

Jackson Hewitt Tax Service® Files Lawsuit in Federal Court Regarding False and Misleading Advertising by H&R Block

PARSIPPANY, N.J., Jan. 31, 2011 /PRNewswire/ — Jackson Hewitt, the nation’s #2 retail tax preparer service, has filed a lawsuit against H&R Block, the nation’s #1 retail tax preparer service, for making what it called “false, misleading and highly disparaging advertising claims” about the company.  The lawsuit specifically focuses on H&R Block’s “Second Look” ad campaign. In the ad campaign, Block claims that they found errors in two out of three tax returns prepared by Jackson Hewitt.  This does not surprise us.

Consider the irony here: Error prone H&R Block claimed that they are more accurate than error prone Jackson Hewitt.  We say that neither one of these chain companies produces the quality tax returns warranted by the fees they charge.

IRS Urges you to Choose your Tax Preparer Wisely

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. You are legally responsible for what’s on your tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. The IRS won’t let you off the hook because someone else prepared your return.

Congress is constantly tinkering with the Tax Code each year, while applying a myriad of exceptions to each of the changes.  It is nearly impossible for a seasonal, unlicensed tax preparer to understand all of the special rules and circumstances that may apply to your situation at any given time, let alone throughout your lifetime.

It is to your benefit to have a knowledgeable tax professional who can find the special rule that applies to your situation; or who can implement a timely tax planning strategy that could reduce your taxes by hundreds of dollars or more.

This is not something you should trust to the big chains that employ unlicensed, seasonal preparers who possess a minimum level of tax knowledge; especially considering that they may actually be costing you more by missing deductions, credits and tax opportunities.

Categories: SACRAMENTO PERSONAL TAXES.