Beware of the Tax Professionals

I have been preparing taxes and H&R Block for three years and can explain, from my own experience, why people come to me, not a CPA, or use software.

First, I explain what I am doing in plain English. Before I got my training, I remember working with CPAs and other sole-practicioner tax preparers. It was almost as if they wanted to keep me in the dark. The tax code is dense enough. I found their explanations even harder to understand.

My clients have complimented me on my ability to translate financial concepts into terms that are useful to them. I take the time to explain what I am doing, not just how much a refund they are getting. Then, I help them plan for the future. In some cases that means a larger refund. In other cases, it means a smaller refund and less of an “interest free loan” to IRS.

Second, my plain English interview is better than what is available from the software. I remember, when using some well-known software not made by Block, spending hours going between their screens and Lasiter’s book to figure out their questions. It was as if their writers could not explain the IRS’ jargon and so just copied onto the screen.

I cannot speak to what other firms train their people. This is my experience.

I have an MBA in finance from a school you have probably heard of and got an A in tax accounting. Then, I still have to take a 66 hour class on forms and the most recent tax laws. After I was hired, I took and addition 40 hours learning the Block approach and how to use the industrial-strength software.

Each year, I must complete more than 24 hours of training to get rehired. In fact, I usually do more than twice that number to keep up on the latest changes and to expand my experience.

In recent years, I have completed more than 200 hours in training about taxes, tax planning and other financial issues. I will let the CPA compare his Continuting Education record with mine. And, we may be taking the same courses (in my state the CPA board accepts H&R Block’s courses for their Continuting Education requirement).

OK, I may not be the typical American when it comes to taxes. But, in the H&R Block crowd I am not unusual. There are some real “nerds” who love to discuss the nuances of taxes and how to do the right thing for thier clients. Just like the Accounting majors I knew in school.

Interesting that the CPA could always find something to improve when he reviewed a return from another preparer or software. I found the same thing when working with returns from other firm, software, or CPAs. Most issues are open to interpretation and most of us can find something to be done differently from what another preparer did. If nothing else, give a warning that the other guy was too agressive and may have left the client open to an “IRS letter.”

I cannot see myself getting a refund anticipation loan. The fees and interest are high, particularly when calculated as annual percentage rates. But, I cannot remember convincing some customers not to get them. Most of those individuals are poor, many do not have bank accounts, and are looking for short-term cash flow. They may not be educated or money-wise, but they are over 21 and if I do not give them a loan, they will find someone else who will (including from CPA firms who work with the same bank we do).

Similarly, with “audit insurance,” some people are so risk averse that I cannot talk them out of buying it. These are the same people who may give up a tax benefit because there may be a “chance of an audit.” While the chance of investigation is minimal, they want to reduce the financial impact as close to zero as possible.

In recent months, I have been helping tax payers respond to “IRS letters.” The CPA who began this thread does not do tax work. Too many of his friends do not stand behind their tax work. Regularly, people come to me because their preparer has “closed for the season” or wants to charge hundreds of dollars. We have offices open all year, prepare responses when a tax agency questions one of our returns, and are available to review returns done by others (at a fee, though we often find other things to fix).

As for fees, people are paying them. Our customers must be finding value. I trust that my training and experience is part of that value.