Tax prep firms... WHY?

[sweeps]

I just found out my cousin spent over $200 to get her taxes done at one of the big tax prep firms. Her taxes aren't that complicated -- she could probably file a 1040 EZ.

For the love of God, why do people do this?

[safari]

I can think of several reasons why people do that:

1) They are lazy
2) Think that the more they pay, the better service they get, which translates to bigger refund
3) Think that taxes are complicated, and one needs to be a CPA to do them right
4) Others are doing that
5) Don't know any better, that's how they've always done it
6) Another firm is charging $300, so $200 is a good deal
7) The firm promised a fast refund

[poundwise]

It is definitely ludicrous to pay $200 for a simple return.

I think the main reason people do things like this is probably safari's number one suggestion above.

However, I think another prominent possibility is that people are intimidated by the process and afraid of making a mistake. You probably notice that all of the ads about H&R Block, TurboTax, etc. are really focused on the ideas of reducing your chances of an audit, providing audit support, and/or guaranteeing against errors.

For the record, I do my own.

[tripods68]

You're cousin needs to shop around like any other services.

We've been going to the our Tax Accountant for the last 5 years and charges:

Year 1. free
Year 2. $40
Year 3. $40
Year 4. $40
Year 5. $40

We itemized and get excellent results all the time. I also gives my Accountant business referrals.

[darenite]

Sometimes the process can be difficult or confusing to the less organized (i.e. the old, the young, the busy), so having a bit of software (or paying a small sum) to simplify or otherwise automate the process isn't necessarily because they're lazy or stupid.

Sure, you save more and feel a sense of pride at having done your taxes yourself, but convenience is often worth some kind of payment (hence the proliferation of tax-assistance firms and software).

I don't use it personally, but I've no beef with people who do.

[PreciousLori]

Does anyone know how much one would make working at HR.B. or J.H.?

I think its a combination of laziness and convienence... Why shovel your driveway, when you can pay someone else... But me, I pinch pennies so Im another story....

[poundwise]

Originally Posted by darenite

...having a bit of software (or paying a small sum) to simplify or otherwise automate the process isn't necessarily because they're lazy or stupid.

Yes, however, a bit of software isn't $200, which isn't a "small sum" for a simple tax return.

[poundwise]

Originally Posted by tripods68

I also gives my Accountant business referrals.

I know its a typo, but I couldn't help but think that this sentence sounds like it was spoken by Popeye --

"I yam what I yam and I gives my accountant referrals."

[sweeps]

I wasn't there so I don't know exactly what happened, but she is young and naive, and they probably took advantage of that. Her tax refund was huge, so they probably made it sound like "Look at how much we're getting back for you... this fee is small compared to that."

Supposedly she did not get a refund anticipation loan. This was just pure prep and filing fees. And by the way, she lives in a state with no income tax, so this was just for federal. Unbelievable.

[Like2Plan]

sweeps,
My very first tax return was done by a tax preparation place. Taxes were always one of the forbidden topics at home, so I didn't have any idea as to where to start. Mainly, I didn't want to go to tax prison for messing up my tax return.

Of course, when I found out how simple it was to do (and how much they charged me for doing a simple return ), I have done my own ever since (even though they have gotten more complicated over the years )

[Joan.of.the.Arch]

That's a shame, Sweeps. It's got to be something like fear or intimidation in her case if a 1040-EZ really was all she needed. It would take a lot longer to go to a business and sit and tell them her needs, make arrangements to pay, and hand over her w-2, than it would take to just fill out the 1040-EZ. What does the EZ have, about 4 lines?

[darenite]

Yes, however, a bit of software isn't $200, which isn't a "small sum" for a simple tax return.

True enough, but I guess it does depend on your definition of "small sum". Then again, this is a money-saving forum, so it's all large :P

[jodi]

My co-worker has similarly simple taxes (single, no kids to claim, standard deduction, only student loan interest to claim). When I found out he was paying over $100 to get his done, I offered to do it on Turbo Tax in exchange for him buying me lunch. He took me up - it really took about a half hour.
I did get mine done professionally once - the first year I was working as a real estate agent (independent contractor status). I watched how they did it and asked questions. I just copied the format the following year and have been doing them by myself ever since. I think people believe it is way more complicated than it is sometimes.

[DebbieL]

Tell her I'll do it for the bargain price of $100 next year, lol. I too cannot understand people with straight forward situations not just doing their own. It isn't hard. I've done them for several people I know over the years (who've paid me a little for my time). I'm always straight forward that they could easily do it themselves. Seems like a big waste of money to me.

[huffydeb2003]

IMO I believe the reason some of these people go to tax prep firms is because they need their refunds instantly. They are willing to pay several hundred dollars for the tax prep fees along with the convenience fees (on their own money) to walk out of the tax prep office with money in hand.

[disneysteve]

I have always had an accountant do my taxes. At first, that accountant was my father and he didn't charge me. Since my father's death in 1992, my cousin has done it. He does charge me but not at the usual rate. I think we paid $120 last year and we have a sufficiently complex return. I have no desire to tackle it on my own. It is well worth paying a professional to do it for me.

[Aleta]

I also think that it is best to go to a professional also. They keep up with all of the new rules. Also, if you are audited, they can represent you. I do all of the bookkeeping but would not want the responsiblity. They are worth what you pay them especially if you have complicated taxes as some of us do.

[losermom]

I've done our taxes with Turbo Tax online for the last couple of years. If you have a State Farm policy you can prepare your taxes for free with them. You have to enter Turbo Tax through the State Farm website, after you log in.

I have also done my mother's, my grandmother's (both widowed and retired) and my Aunt's (Single parent definitely living under the poverty line)taxes for the last couple of years. I always enter Turbo Tax through the IRS website and our state website as all three of them qualify for free tax preparation and filing. I also have done my DD20 taxes, but this year she is going to learn how to do it herself.

If really bugs me that they would have to pay someone/professional big bucks to prepare their 1040EZ forms. One year my mom had to take out a loan to pay the tax preparer fees and she received no refund that year. I don't really care about the refund, but I felt the tax preparer was taking advantage of my mom and my grandmother (she's 93).

In payment, I usually get a really good homemade lunch from my grandma. Yummy!

[Aleta]

losermom: That was really good information for those who buy turbo tax adn are policy holders of State Farm. I never knew that an insurance company would do this. Great tip!

[Joan.of.the.Arch]

I'd feel skittish about running all my tax info through a site provided by my or any other insurance company. I guess they'd love to see how deep my pockets are.