A few weeks ago, I let the cat out of the bag that IOOGO is on a mission to make the tax preparation process easy, transparent and more reasonably priced. I want to talk more about the last reasons mentioned… cost and transparency.
www.franchisehelp.com estimates that $11 billion will be spent this year in tax preparation services. In 2017, over 152,000,000 tax returns were submitted to the IRS. I recently surveyed thousands of taxpayers to understand how people were filing, how much they were paying for filing and how happy they were with their tax preparation services. Approximately 80% of respondents reported that they are paying anywhere from $1 (which was really just part of a range selection, I don’t think any preparation service charges only $1) to over $550! Over 50% of respondents that reported paying for their services paid over $100. But wait, there’s more.
The average amount paid for online tax preparation is approximately $45, and the average amount paid for professional services (tax preparation office or accountant) is approximately $275! 25% of those reporting filing through a professional went to a tax preparation office, i.e., H&R Block. If we apply that statistic to the number of consumers that filed taxes last year, over 17.5 million people paid an average of $275 to have their taxes prepared by a non-CPA. That’s right, those guys at your local H&R Block are NOT a CPA (note: most CPAs are not tax professionals). You too can be a tax preparer just like them. As long as you are 18+ years of age, complete some training and pay for the franchise. A GED or diploma is NOT required. If you don’t believe me, you can read up on the requirements for the most popular tax preparation franchising business here.
It’s so frustrating to know that people are paying so much money at these preparation offices for something they can do their self for free, or at least at a much lower cost (more on that in future blogs). Many tax preparers are part-time order takers inputting data into a step-by-step software application. There is no judgment on those who have gone to a tax preparation office to file their taxes. For one, the tax code is over 2,600 pages so who wants to risk messing something up with a tax code that extensive? And for two, these preparation offices are advertised as tax professionals, so it is easy to assume that more certification/accreditation is required.
I have family members, including my mom, that learned the hard way. She went to an H&R Block years ago because being self-employed, she thought her taxes were complicated. She paid over $300 for the services and then paid the IRS $2,000. She learned the next year that there were deductions she could have taken and could have been refunded $2,000 instead! There are many stories like this out there on www.consumerreports.com. My favorite was from Brendan that had completed his taxes for years online and had consistently received a refund, even always around the same amount because his income never changed much. He decided one year to go to a franchise location instead. The result was him correcting the spelling of his name and amount inputs, a $350 preparation fee and he OWED money to the IRS! And that $350 was for 25 minutes of the tax preparer’s time, that’s $14 a minute! The tax preparer even corrected him when he was livid about paying $350 for 29 minutes, stating it was closer to 25.
The overwhelming feedback received in the survey is that taxpayers that choose the option of a tax professional fear doing it wrong, again not realizing the lack of credentials of most tax preparers. Our government is really good at over complicating things; try navigating thru any of their websites if you need confirmation of this. However, at IOOGO we are building a solution that simplifies all of that. My partner Josh, who has over 15 years of experience in the tax preparation business, identified that the other online options take you down rabbit holes in false hopes that you find a better outcome. Our survey has provided valuable feedback on how we can address the pain points that the other guys either don’t realize or don’t care to fix. We also know that our unique business model allows us to offer our simplified solution at a lower cost than current options. There are much better things to spend your time and money on so save on both with IOOGO.