H&R Block Goofs on Its Own Taxes 170
omar.nyc writes "Red Herring reports tax preparation giant H&R Block, manufacturer of TaxCut and other tax software, goofed on its own taxes. The miscalculation on its state income taxes are liable by $32 million. This will reduce Block's fiscal year 2005 earnings by $0.02 per share and $0.02 per share in fiscal year 2004." From the article: "Besides the problems that Block had with its own tax prep needs, the company also experienced difficulties with the technology in its offices last month that hit its bottom line early in tax season. 'Technology problems across the H&R Block network in early January impacted our ability to serve clients in those crucial early weeks,' said Block Chairman Mark A. Ernst. He said the problems had been corrected, but they impacted the company's ability to serve 250,000 clients at that time of year."
Re:Place the blame where it is due... (Score:2, Interesting)
I'm a lead at an Intuit (TurboTax) calllcenter, hence the reason why this is me being a coward.
And even though some people over estimate the complexity of taxes, they aren't that extreme. For most people, what they enter is not entirely complicated by a significant degree. Hell, most people only need to fill out a 1040EZ, (while yes, I know that a deal of
But to say that people can't understand the sections of tax law that pertains to them is underestimating most of the population. For the TurboTax program, we had one of the longest training periods (launch class admitted) all the projects at the center, though it was only five weeks. During those five weeks we went over a lot of basics, such as: proper search methods, security, etc., but tax law and sparse and in between, taking up much less time that computer related areas. This is however in contrast to the amount of tax knowledge despite their computer related knowledge. Pertaining things such as calculations upon specific forms, through out the program, qualification limits, things of the such.
Perhaps if I was not in the semi-unique situation of dealing with this every day, I would not be able to guess my opinion, though in the end, my point is: I don't believe tax law is that complicated, and at a quick two minute check at irs.gov you can find out what you're looking for (if you know how to look for it).
-Brandon
Flat Tax! (Score:3, Interesting)
Unfortunately, reformers are split between the Flat Tax and Fair Tax [fairtax.org], aka national sales tax. The problem with the Fair Tax plan is that it will require the repeal of the income tax amendment, which will take years under the best circumstances. The Flat Tax requires no constitutional changes. At the very least the Flat Tax could be used as a stopgap measure. Then there's the slight problem of Congress losing the ability to sell tax loopholes to lobbyists (awww). Personally I think wiping out the source of much of the corruption in Washington is a Good Thing.
Wikipedia Flat Tax [wikipedia.org].
Re:Tax simplification (Score:3, Interesting)
Something like "plug in total assets and total change in assets since last year, and find tax".
...which probably wouldn't have helped out H&R Block at all, because they miscalculated their liabilities (which I assume you're going to have to subtract from assets anyway).
Congress could certainly simplify the tax code in a few ways (get rid of the credits and some of the more esoteric deductions, move the rest "above the line", eliminate the phaseouts, and then probably raise the standard deduction and/or exemption to compensate). But a lot, probably the majority, of the tax code is fairly necessary if you're going to have a meaningful taxation of income.
Your suggestion is comparatively simple (somewhat), but (even adjusted to make sense) it probably wouldn't be considered very fair. If Bill Gates makes $1 billion and spends all of it, he'd pay no tax under that system, while anyone saving money for the future, no matter how little they actually made, would. So then you have to decide what types of spending are deductible, and what isn't.
Simplifying the tax code without opening up loopholes or other unintended consequences is difficult. Doing so while pleasing your constituents is nearly impossible.
Re:Tax Instant Refund Scam; Loan, not Refund (Score:3, Interesting)
Yes, there is a fee associated with doing their taxes, and there is a fee to get their 'instant refund' - but you saying that they are 'charging 500% on that refund' is just sensationalizing the event.
Charging 500% means charging $500 on a $100 refund - that is not what is happening here.
They (and by proxy, you) are using voodoo math to come up with scary numbers but hiding the details of what you are doing. Here's the real deal:
Let us use some simple numbers, to bring some reality to the table
Poor person has an income of $40,000 for the year and had $10,000 taken out of their pay check over the year. They obviously 'overpaid' their taxes and are getting a refund.
Say their real tax bill after exemptions is $5,000. They are going to get $5,000 back.
Take their W2 papers to H&R Block to have a simple 1040EZ cranked out. That is one form, HRB charges (lets pretend) $50 to do that one.
They do have a bank account, and want to file electronic filing (this may be required to do the 'instant refund'). This is one form, HRB charges another $50 to do that one.
They want their 'instant refund' - this is yet another form, and HRB charges $50 to do that one, and charges them 1% of their refund in 'interest' on the loan (this is $100.)
Net fees and interest = $250 to get their taxes done and walk out with $4,750 in cash in their hand.
IRS refund comes back in 7 days because they electronically filed it on a Friday (refunds are electronically dispersed on Fridays, best of my knowledge.)
Fees + interest of $250 on $5,000 is 5%. That is the real math, and it doesn't look too sleazy (considering it includes Tax Prep.)
$250 worth of fees and interest on a $5,000 'loan' for 7 days comes out to an APR of 260% interest - which is really scary. Add in (and charge for) a few more forms (such as the one poor people use to get the earned income credit), use more real numbers so they are only getting back $2,500 so the fee : refund ratio goes up and all of a sudden the $300 dollar charge to process their taxes and front them the $2,200 in cash looks like 500% in interest. Which is bogus, plain and simple.
Yes I went to HRB this year to do my taxes, after I had already done them once by hand. Cost me $200, and their calculation netted me $500 more than when I did it myself. Having it e-filed and going into my checking account, and no I didn't get the 'instant refund' - but if I really really needed the $3,500 right then that day and couldn't have waited another two weeks, would it have been worth another $100 to walk out with cash? Yea, and the 'interest' would have been 3%, not some made up magic math 500%.
Another fun tidbit of information - you can walk into HRB, have them do your taxes front to back, tell you all the tricks they are using and watch them go through it step by step and if you don't like their numbers (or fees, or whatever) you can walk out for free. No charge - but you don't get any of their paperwork. Have a good memory? You can walk in, watch them do it on TaxCut or whatever, walk out for free and go home and do the exact same refund using any number of cheap tax prep packages. Same refund, if you paid attention to whatever they did, and you don't have to pay their fees. The only thing you give up is having them stand by your side if the auditors come pay you a visit on that return.
I think they are clowns for blowing their corporate taxes, and I agree with you that going with the 'instant refund' is a real stupid idea, but that doesn't mean we need to resort to twisting the numbers or blowing things out of proportion to make them 'scary' and 'evil'. That's what the MebiByte fuckers did with hard drive space, and we all know how much I hate them.
If you want to do some REAL math, let a bunch of people do their own income taxes, particularly those with more than two forms, then walk into HR
Re:Flat Tax! (Score:3, Interesting)
Your not looking for a fair tax system, your looking for a way to feel good by kicking the rich in the beanbags. Go read The Fair Tax Book [amazon.com] by Neal Boortz before you start ripping the Fair Tax [fairtax.org] as unfair gifts to the wealthy. It's an short (208 Pages) and easy read for small minded people like yourself. And take solace in the fact that Neal will have to pay confiscatory taxes on the money he makes on you.