This article is part of a 5-part series on tax preparation methods. To learn more about your tax filing options, check out Why You’re Filing Your Taxes Wrong.
According to Experian, nearly 1 in 5 taxpayers used on-site tax preparation last year. Using a big box preparer like H&R Block, Jackson Hewitt or Liberty Tax can be an easy way to take the headache out of filing taxes. Factor in easily accessible offices and extended hours during tax season, and it’s easy to see why big box preparers are a popular choice.
Attractive though they may seem, the reality is that the cost of preparation at a big-box preparer is often pretty steep relative to the benefits you’re getting. Before you sign on the dotted line, there are several important caveats you should consider.
The (Mostly) Bad
The promise of big-box tax preparers sounds great: bring your paperwork in to your local branch and have your taxes prepared on the spot by a trained professional for less than the cost of an independent professional. The reality is somewhat less rosy. There are several issues that can make big box preparers less of a bargain than they might first appear:
- “Professionally trained” is a loose definition: While many preparers do hire credentialed tax professionals (check out our guide to tax professional qualifications for more details), many of the employees who prepare tax returns at big box preparers have little more than a training course administered by the preparer. In some cases, the person preparing your taxes may even be using the same software you could purchase directly for much less.
- Relatively high cost: While costs vary, you’ll almost certainly pay more for tax prep from a big-box preparer than if you use software: H&R Block reports the average cost of their services was $192 per return in 2012. With rates that rapidly approach those of independent professionals who often boast more experience, the allure of a big-box preparer can quickly start to fade. That said, a big-box preparer can help save time that you would have spent filing taxes on your own, though in most cases, you’ll be sitting in the office with the professional as they walk you through your taxes.
- Unscrupulous business practices: In recent years, several big-box preparers have come under attack for taking advantage of consumers through products like “Refund Anticipation Loans” and “Refund Anticipation Checks.” While the details vary, the bottom line is that some preparers will charge exorbitant rates to defer the cost of preparing your taxes. For example, H&R Block charges $54.95 in addition to the tax preparation fee to have the cost of your tax preparation deferred until you receive your refund (typically less than 21 days according to the IRS). Several preparers incentivize customers to take their refund on a pre-paid card, which can carry hefty fees like $2.50 per ATM withdrawal and a $2.50 inactivity fee if you don’t use the card for 3 months.
Of course, many tax filers have a great experience at the big-box preparers, and the peace of mind that comes with having a human look over your returns is a nice bonus. Some preparers even offer “audit protection” that you can buy in case you get audited. In addition, products like a Refund Anticipation Check can defer the cost or preparation if finances are tight, but be aware you’ll end up paying more in the long run – often around $50 to defer payment for 3 weeks or less.
If you do decide to go with a big-box preparer, be sure to ask about the training and education that your preparer has received. You may also have better luck at franchise-owned locations, which are often run by credentialed tax professionals who bring more of a consumer-focus to the business.
To learn more about your tax filing options, check out the other guides in this series:
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