Big Name Tax Prep Services Are a Waste of Money

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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, Liberty Tax Service, 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?

The “accuracy guaranteed” gimmick is all hype. Your tax preparer is supposed to accurately calculate your taxes. They don’t need to offer a worthless guarantee like this. Simply put, the taxpayer gets no value.

Don’t fall for the “we’ll check last year’s return” scam. This is just a way to get you in the door, and really doesn’t help you. For the average taxpayer, the IRS will notify you if you’ve missed some income or deductions, or if you’ve made some other type of error.  You don’t need a low quality tax preparer to do that for you. It’s just bad.

Avoid the bells and whistles. 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.

One note about filing on your own. Don’t fall for the “free software” gimmick from companies like Turbo Tax, TaxACT, or H&R Block. Nothing is ever really free. They will typically offer you access to the federal tax return portion of the software for free, but if you want to e-file or do a state return, you’re going to end up paying. (And since almost all states have income taxes, it’s likely you’re going to need to do a state return.) You’ll probably still want to use their software, and that’s fine. Just understand that by the time you’re done, you’re probably going to be paying something for the software.

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