Hidden Fees Behind Popular Tax Chain Offerings

For various liability issues, I’m reluctant to actually mention this company by name, but let’s say that there’s a big, popular company who made its fortune on the backs of lower-income taxpayers. This company is flooding the airwaves with a brand new program offering “free” federal tax preparation and $9.99 state tax prep.

Maybe you’ve heard about it? Well, like many such things, there are, shall we say … strings.

First of all, here are the restrictions: it only covers those filing the 1040EZ federal form, which covers only the very simplest tax issues. It can’t be used by anyone who has dependents, makes more than $100,000 per year, is age 65 or older, claims adjustment to income like alimony or tuition deductions, or itemizes their deductions. Thus, homeowners who deduct mortgage interest or people with large charitable contributions can’t use the 1040EZ.

Plus, filers have to pay fees for other forms and any other fees incurred which are conveniently not mentioned — and they have a tendency to pile up.

A few years ago, when this company first actually rolled out this strategy and was asked by stock investors why they were was doing this, an executive replied: “Our ability to monetize this program means a minimal impact on our net average charge,” Retail Tax President [for said company] Phil Mazzini told analysts. (Source: http://www.bloomberg.com/bw/magazine/content/11_05/b4213023812682.htm)

In other words: yes, we are offering “free” tax prep, but we still bring in the same fees!

It’s always enlightening to look at executive interactions with stock analysts to see why public companies do what they do, I’ve found.

So — in summary: don’t be seduced by the siren call of getting something for nothing. You usually end up paying for it, in a whole host of ways.

In fact, one of OUR revenue centers over the years has always been in fixing the mistakes made by these “big box” retail tax outfits and off-the-shelf software programs, and discovering loads of missed opportunities and deductions, which led to overpayment of taxes.

(Because, speaking of software: do you remember when a former Treasury Secretary used the leading tax software to do HIS taxes, unintentionally created a bunch of errors with it, and then blamed the software itself for all of his tax problems in front of the Senate? Not an uncommon issue, I’m afraid.)

The old adage IS an adage, because it’s so often true: you get what you pay for. It’s the foundation for a stable economic system because it’s almost always true.

So yes — this article is certainly self-serving, as you can see. I can’t get around that, unfortunately.