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Tax Prep Industry Bashes ‘Outdated’ EITC Report

Posted on Apr. 3, 2024

Tax preparation companies have accused the authors of a study that alleges the industry deliberately targets minority earned income tax credit claimants of cherry-picking its findings.

David Ransom of the American Coalition for Taxpayer Rights, a trade association representing major retail tax prep companies including H&R Block, Liberty Tax Service, and Jackson Hewitt, said the March 27 report relied in part on a 2014 Government Accountability Office study and a 2015 article to make the case that these firms not only target minorities but routinely commit errors in filing customers’ tax returns.

“It’s just a rehashing of materials that are completely out of date and of virtually no value. I think the report [also] cites a 2008 report. . . . The market has changed a lot since then,” Ransom told Tax Notes, referring to a Treasury Inspector General for Tax Administration audit that showed 61 percent of tax returns filed by unenrolled preparers — which make up the vast majority of preparers — contained significant errors.

The central allegation in the study by Color of Change, Better IRS, and civil rights attorney Portia Allen-Kyle is that “counties with more Black taxpayers and EITC claimants have seven percent more Liberty Tax and 14 percent more Jackson Hewitt locations,” and “counties with more Hispanic taxpayers and EITC claimants have 11 percent more Liberty Tax locations, eight percent more Jackson Hewitt locations and five percent more H&R Block locations.”

Researchers compiled the figures using the IRS’s authorized e-file provider database and a 2016 report by the Progressive Policy Institute that studied the correlation between EITC claims and large metropolitan areas.

The authors also pointed to a 2019 GAO report that said in addition to offering refund anticipation checks, the companies offer refund anticipation loans, which are 36 times more likely to be used by Black taxpayers and can have interest rates as high as 33 percent. However, Ransom contends that those loans are much rarer now, without citing specific data.

Mark Darling of H&R Block defended his company’s footprint as a consequence of its success.

“With nearly 70 years of experience and more than 935 million returns filed worldwide, we have a long history of helping hardworking Americans achieve the best possible outcomes at tax time — and with 9,000 locations across all 50 states, most Americans live within five miles of an H&R Block office,” Darling told Tax Notes.

Whether or not they are enrolled agents, Darling insists H&R Block employees are well trained.

“Contrary to what was implied in the report, H&R Block’s 60,000 tax professionals have an average of 10 years of experience, and a robust series of required training courses and annual continuing education on the latest tax laws keep them well-prepared to tackle unique situations — and we have long advocated for industry standards across the tax preparation industry,” Darling said, noting the company has a 100 percent accuracy guarantee.

Igor Volsky of Groundwork Action, a progressive policy group that organized the release of the report, dismissed the counterclaims.

“The report offers an overview of this issue, which has been a problem for quite some time. The government tried to regulate the industry in 2010, and it failed. We’re still here in 2024, and the core problem of tax prep companies’ so-called professionals not having the qualifications needed to properly file tax returns remains,” Volsky told Tax Notes, noting that return preparation companies opposed other initiatives such as a free direct-file service offered by the IRS.

“If H&R Block or any other company in the industry wants to lead the way [on reform] . . . I would encourage them to do that by enacting tougher standards for their employees and urging lawmakers to pass legislation,” Volsky said. “That would be a positive development.”

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