Every year as soon as the ball has dropped in Times Square and the New Year's signs are taken down, the big tax chains begin swinging into action and opening their doors for their only season of revenue. They aren't the only ones getting into the tax preparation business. Rent to Own Furniture and Appliance stores, Car Lots, and Check Cashing stores seem to have salepersons who are now able to prepare and file taxes when just last month they were employees hawking their respective products. This presents a danger to the consumer for a few reasons and we will examine those reasons here.
1. Experience and Training
As it is for the average customer walking in to the big tax prep chains, they are dealing with tax preparers who, as smart as they may be, often have little to no experience in the preparation of tax returns. The training for these newbies at best is eight hours of training over a weeks' period of time. These are school bus drivers, students, retirees, and others drawn to part time work. Having trained some of these preparers, for three of the major tax prep chains, I can tell you that yes, there are talented people in these positions, but there are others who I would argue that they aren't ready to be paid to prepare a return. The argument I got back from the tax store owners was that they needed warm bodies filling seats and filing returns, capable or not. The goal was always numerical, not accuracy.
However, in the examples of the car lots, check cashing stores and furniture and appliance stores, the person preparing your return may actually have less training than the newbies in the tax prep chains. These preparation services are called, "third party" because while the tax prep chains use unqualified persons every year, their main work focus is the preparing of returns. The other examples are using tax preparation services as a 'hook' to get you into the door to buy a Television, Car or to cash your rebate check.
More often than not these 'preparers' before tax season were sales people and after tax season will continue to be sales people. Their experience in this aspect of their store is likely less than yours is. You would be better off using Turbo Tax online or one of the free IRS websites to prepare your taxes than going with these guys.
2. They Have a Vested Interest in the Outcome
Any time the person preparing your return benefits should you receive a higher refund, there is an opportunity ripe for fraud, and once you sign that return, their obligation to accuracy ends, and you are on the hook. Some of these stores offer the tax preparation for free to get you in the door, and if they can bump up a refund of $2000 to $4000 thinking you would get the better car, and they would get a better commission in the sale of that vehicle or appliance, your best interest is out the window.
A larger check amount means more revenue for their store as it represents more money you intend on spending there. And there are individuals who are out there who are interested only in the here and now, let consequences be damned, if it means they get the HDTV now, let the IRS catch up with them later. But for most of us, we actually care about getting it right so we don't have those consequences to deal with.
This brings to mind another fraud that occurs along these same lines. Every year there are preparers who charge a prep fee based on the amount of the refund. Let me state in very clear terms, THAT IS ILLEGAL. Why? because they can bump up their fee by adding deductions you aren't entitled to and don't legitimately have, investment losses when you've never invested a dime, student loan interest or tuition credits when you aren't a college student simply to get more out of you. If any preparer ever tells you that the cost for preparation will be a percentage of your refund, RUN! You are dealing with a criminal, whether he knows it's illegal or not it will be nothing but trouble for you.
3. Their Loyalty is Divided
A good tax professional will attempt to do what he or she can to make sure their clients don't pay more than they need to in taxes, but will do so in a completely legal and ethical manner. A good tax professional's fiduciary responsibility is to you, his client and his emphasis is on satisfying you with his services. The Joe Schmo car salesman's main goal is to get you into a car he gets paid a commission on. While he should be focusing on making sure your return is accurate, (if he knows what an accurate return looks like), he is focusing on selling you the high end model and not the 10 year old clunker. Joe's fiduciary responsibility is in getting you enough of a refund that he gets a decent commission.
So with little experience, and sub-standard training a cashier at the check cashing store is now a tax preparation specialist. And while there may be many people lined up at the door because this one guy at the check cashing store seems to get people more money back than the others, you need to be cautious about who you choose to prepare your return. They are not interested in getting your return accurate, they are interested in what they can sell you once the check is in their hands.
If you must get your return prepared in a big chain tax prep franchise, do so, you certainly don't need a CPA for about 90% of returns prepared. But be forewarned about these third party tax preparation services. I would no more get a return prepared at a rent to own store than I would purchase anything from them or any other business else looking to cash in on other people's idiocy. A Test: Ask the preparer a tax related question you already know the answer to and if he or she can't answer, find another preparer.
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