Tuesday, January 22, 2013


Why do I advise individuals not to use the services of a “fast food” tax preparation chain?  Here are two reasons -

(1)    As I have continually pointed out, Henry and Richard, and the others of their “ilk”, ain’t cheap!  Why?  While, like anything else, the market affects the price of tax preparation, the major factor affecting the fees charged is overhead. Let’s look at the overhead of these “fast food” chains.

Because the storefronts where these chains are located are usually in high traffic commercial areas, and often shopping malls, the rent is generally very high. And an important factor – H+R Block and Liberty and Jackson Hewitt storefronts are only open during the tax filing season, yet they must pay rent on the property for the entire year.

These chains have excessive advertising budgets during the season, spending millions of dollars on constant tv and radio spots as well as print advertising telling you not that they competently prepare accurate tax returns but simply to come into their office and walk out with a check. Hey, doesn’t H+R advertise during the Super Bowl.

H+R Block et al are corporations, and have highly compensated upper level corporate officers and employees with generous employee benefits. A while back the Associated Press reported that “H&R Block Inc. CEO Russell Smyth received compensation valued at $5.3 million in fiscal 2009, the year he took over leadership of the nation's largest tax preparer”.

With commercial preparation chains I expect that the actual cost of preparing the return - salaries paid to the seasonal preparers and the training of these preparers - is one of the smallest items in the budget.

As I have always said – when you use Henry and Richard you pay fancy restaurant prices for fast food service.  To be honest I am not being fair to fast food franchises – I have actually received good service at McDonalds and Burger Kings.  

(2)  A few years ago the Government Accountability Office (GAO) conducted a study which resulted in a report to Congress titled “Paid Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors”. This study was one of the reasons the IRS began its investigation into the regulation of tax return preparers. 

The GAO sent undercover agents with two different tax scenarios to a total of 19 offices of 5 “fast-food” commercial tax chains, including H+R Block, in a metropolitan area. In only 2 instances was the correct refund calculated, but all 19 returns contained errors.

I was surprised when I was told by the GAO at an IRS Nationwide Forum that not one of the 19 preparers in the study had asked to see the undercover taxpayer’s prior year’s return!

Other undercover operations, by the office of the Treasury Inspector General for Tax Administration (TIGTA), local tax agencies, and consumer protection organizations, have found similar results.  These findings have led to the current IRS tax return preparer regulation regime.

My mentor always said he wished that H+R Block would open an office next door to us.  He felt we would make a fortune correcting the errors made on H+R-prepared returns.

It is better to be safe than sorry.  I recommend that you do not use a “fast food” tax preparation chain to prepare your federal and state income tax returns.
Of course I must end with the following disclaimer -
Iit may actually be possible that the best tax preparer, at the best price, for your particular situation may be an H+R Block, or other fast-food chain, employee. But this is only because of the education, experience, ability, temperament, and other factors that are specific to that individual preparer.



Anthony DiPierro, EA said...

Seems to me your disclaimer negates your whole argument. There are good tax preparers who work for H&R Block and there are bad tax preparers who work for H&R Block, just like there are good tax preparers who don't work for H&R Block and there are bad tax preparers who don't work for H&R Block.

Robert D Flach said...


There are ethical and competent tax preparers working for Henry and Richard, but in my experience this is the exception and not the rule.

Regardless of the competence of the individual H+R preparer, the fee is overly expensive considering the value of the service provided.

And H+R aggressively encourages customers to purchase expensive and unnecessary "extras".