A year and a half ago, I posted a rant about the H & R Block ad claiming that Americans who prepare their own taxes overpay by a billion dollars, and that this is a reason to use H & R Block. To summarize, my complaint was this: That billion dollars amounts to an average of about $21 per return. And, by H & R Block’s own numbers, they charge an average of $77 per return.
So, if you go to H & R Block, you will pay on average $56 more (collectively to H & R Block and the IRS) than if you do your own taxes.
Since then, this has become the most commented-on post on my blog, with the overwhelming majority of comments coming from people who work for H & R Block coming to defend their honor (or something). When these comments first started showing up, I thought it might be an astroturfing campaign my H & R Block, which would be sort of a mark of honor, in a way. However, I think that these are genuine, organic comments, which makes me sort of sad.
I always find slavish jingoism depressing, whether in the context of nationalism, or sports, or college loyalty. But in the context of your employer — an employer that does not actually treat the people who work for it all that well, based on many of the comments — is some serious Stockholm Syndrome shit.
Many of the comments cover the same ground. So, rather than responding in the comment thread, I thought I would address things raised in the comments here. Note that these are not actual comments, but paraphrases of whole classes of comments.
Comment: But tax professionals have to study hard every year to keep up with the changes in the tax code!
Fine, I believe that’s true. I fully believe that you have skills and knowledge that I don’t have. It’s just that if the cost to me of using those skills is $77, and the cost of not using them is $21, that’s not a strong incentive to use them. Plus, as I noted in the original post, part of the reason why you need to study so hard each year is because of lobbying done by H & R Block and others to keep the tax code complicated. So yes, you are a hard-working cog in a well-oiled extortion racket. Who’s a hard-working cog? You are!
Comment: I’m not ripping anyone off. In fact, I only get paid a small fraction of the customer fees.
I am perfectly happy to assume no ill will on the part of any of the tax preparers themselves. It’s an annoying ad campaign is all. So the post was really aimed at the marketing department. Also, based on the numbers getting thrown around in the comments, you should all become freelance tax professionals. You could charge half of what H & R Block does and take home more money.
Comment: What about the time it takes to prepare your return? Isn’t that worth something?
Yes. In fact, I made exactly this point in the original post. There are plenty of legitimate reasons to pay someone to do your taxes. Top of the list is that you don’t enjoy doing it, and would rather spend your time doing something else. A+ on basic economics. C– on reading comprehension.
Comment: Aren’t you actually a rival company trying to take down H & R Block, or an ex-employee with a grudge?
No. I’m just a guy who sat through that damn “Get your billion back, America!” ad one too many times.
Comment: If you underpay your taxes, you’ll have interest and penalties.
This is a good point — in fact the only sensible point that came up in the comments that was not addressed in the original post. It’s not just a question of maximizing your deductions. If you make a mistake and underpay, you could wind up owing a lot more. One could do a similar calculation. If, on average, it costs you an extra $56 to have H & R Block do your return, how does this compare with the average penalty size? I don’t know the answer, but your taxes are at all complicated, it’s something to factor in.
Comment: Actually, we’re tax professionals, not CPAs!
Um, okay. I don’t even know where this is coming from. Maybe the fact that I cited statistics from the National Society of Accountants? Maybe one of the other commenters erroneously referred to the tax preparers working for H & R Block as “accountants” or “CPAs”? In any event, I apologize for any confusion, and for inadvertently overrepresenting the credentials required to work for H & R Block, I guess?
Comment: If you don’t like the price, you don’t have to pay.
This I did not know. It would take a special kind of asshole to come in, let someone work through their taxes and fill out the forms, and then take it home without paying. However, if you are comfortable with this, I guess you should definitely take your taxes to H & R Block!
Comment: Something something averages don’t matter every return is different blah blah.
Yes, some people will come out ahead, when the tax preparer finds a huge deduction they were unaware of. Other people will come out worse than the average. That’s how averages work. If you have good reason to know which group you would be in as a customer, that should inform your decision. If you don’t, then the average is useful.
Note that it still may be worth it to pay someone to do your taxes, as it will reduce your variance. In much the same way, you will, on average, pay more for your insurance than you’ll get back. The reason you buy insurance is to hedge against the big losses. Similarly, if there is a possibility of a big error in your taxes, hedging may be the right thing, even if it costs you more on average. However, if we’re talking numbers in the tens or hundreds of dollars, you’re better off playing to the average — over the course of several years, you might expect things to, you know, average out.
When I wrote the original post, I had no opinion one way or the other on the competence of the people who actually do your taxes at H & R Block. However, the nature of many of these comments does give me pause. If the lack of attention to detail and incoherent innumeracy on display here is typical of the people who work for H & R Block, you might look elsewhere.