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Taxpayers want up-front pricing from paid tax preparers

Everybody loves a bargain, even when it comes to paying someone to prepare our taxes.

Bargain tags

But, say consumer watchdogs, too often taxpayers don't have a good way to comparison shop for a tax pro and find the one that provide them the best service for the price.

"The price of preparing a tax return is often only disclosed to a consumer after the return is completed," according to the report "Public Views on Paid Tax Preparation," released on Jan. 20 by the Consumer  Federation of America (CFA).

The CFA says that mystery shopper tests have found tax prep fees that range from as high as $500 to unrealistically low estimates for a return's total completion cost. And some preparers refuse to give any estimate of what you could pay for their service.

But people want to know how much it will cost them up front, not after the fact, says Rich Jones, director of policy and research at the Bell Policy Center.

Up-front, written price lists: Jones' assessment is supported by findings in the CFA's report.

When asked about tax preparation costs, 89 percent of the CFA poll respondents said they favor a requirement that paid preparers supply customers an upfront list of fees.

CFA tax preparer fees sruvey January 2016

That 89 percent of folks wanting to see in writing what they will be expected to pay their tax preparer earns this week's By the Numbers honor.

Those surveyed by the CFA also support the posting of fees in tax offices, as well as requiring a full explanation of charges after the return is finished.

Taxpayer variables mean variable charges: I sympathize with taxpayers who've fallen prey to less than reputable tax preparers who provide a low-ball estimate and then tack on separate charges for everything related to a return. 

Fees that taxpayers have been surprised to see on their final return prep invoice include such things as warranties against filing errors, processing or electronic filing fees, and charges for submitting state returns.

But I also know that tax return preparation is intensely personal. Every taxpayer's situation is different, and sometimes, you don't know exactly what filing will require until you get into the process. In these cases, the fees aren't hidden; they're just undiscovered.

The infinite possibilities for changes in filing -- and the charges for the time and expertise to accommodate these individual taxpayer return vagaries -- make it incredibly difficult for any tax pro to say that the price quoted at the beginning will be the final one when all the work is completed.

So rather than requiring set-in-stone fee schedules, tax preparers should be willing to openly and early in the process discuss what might happen.

And to avoid getting a surprisingly costly tax preparer bill, taxpayers must ask as many questions as possible before turning over their tax lives to preparers. In addition to getting the dollar amounts that you likely will be charged, ask how the fees are determined.

Tax pro testing and licensing: In addition to asking taxpayers about preparation costs, the CFA asked about tax preparer, well, preparedness.

As I noted last week at my other tax blog, the CFA report found that most taxpayers -- 83 percent -- want paid preparers to be licensed.

Another 80 percent believe that paid should be required to pass a competency test.

Bankrate Taxes Blog logoAlso over at Bankrate Taxes Blog last week, I looked at the Internal Revenue Service's hopes for a smoother tax filing season this year.

I usually post my additional Bankrate tax thoughts at that website on Tuesdays and Thursdays. Then the following weekend, you can find highlights of and links to those posts.

Comments

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Brian

We just launched a startup aimed at exactly this problem - Taxaraoo allows you to find a tax pro and have them prepare your return at clear, upfront prices. Everything is done online, so you don't even have to leave your house to file your tax return.

Brent

At least on the online preparation I can understand the frustration. As a taxpayer myself the constant nag screens for upgrades and add-ons can be painful. I now work for a tax preparation company (TaxPoint) and we wanted to make sure our pricing was up-front, clear and without feature specific add-ons.

For instance, one major online tax prep company is now charging $30 to just pull your information from last year's return. Ouch.

As for pre-purchasing, we're listed on Amazon for the first time this year, and are currently offering up to 70% off for those that pre-purchase there. It'll be interesting to see how successful that is and if taxpayers do indeed want to go for paying a fixed discounted price up front.

Robert D Flach

KB-

As a tax preparer for over 40 years I can truly say that it is literally impossible to tell a potential client exactly how much it will cost to prepare a tax return until the return is almost finished. The best one can do is provide a good faith estimated range based on the prior year's return, the potential clients initial representation of what is involved for the current year, and a review of the information returns and documents provided by the potential client.

Clients who tell tax preparers that "it is a simple return" never have a simple return.

One large factor is the level of organization of the client. For example, providing a worksheet with specific numbers vs providing a box full of receipts.

And past year's returns are not always an indication of what is involved on a current year's return, as things can change and new law and new transactions can occur.

A preparer can provide a potential client with a fee schedule and explanation of how the fee will be determined.

A taxpayer looking for a preparer should look for referrals from family, friends, and co-workers, who can advise the taxpayer on the range of fees they have paid to the preparer they are referring in the past.

One thing to note - don't think Henry and Richard or other fast food preparation chains will provide the best price or best value. They ain't cheap - and the level of service is far inferior to an independent tax professional.

Robert D Flach
The Wandering Tax Pro

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