H&R Block Goofs on Its Own Taxes

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."

Comments

Use a professional tax service

[dotslashdot]

They should really have someone professional do their taxes.

Tax Instant Refund Scam; Loan, not Refund

[layer3switch]

According to H&R Block's website;
http://www.hrblock.com/
"Fast Money
Walk into an office with your taxes, and walk out with an Instant Money Refund Anticipation loan check. Up to $9,999 based on your refund amount. Money in your hands fast."

People, don't ever EVER get your tax refund this way. You may be in a financial jam or just impatient to get your money, but this is sure way to loose your money in a blink of an eye, and possibly the most stupidist thing you can ever do. The % you loose due to interest rate for loan in this case is highly unregulated and its easy to get scammed.

Here is a quick article on pending lawsuit against H&R Block in California, posted on MSNBC.
http://msnbc.msn.com/id/11373754/

Just wait 3 weeks and get your full refund (if you don't owe that is), or ready to get charged 500% on that refund.

Re:Tax Instant Refund Scam; Loan, not Refund

[Glonoinha]

Don't fear-monger and don't blow shit out of proportion just to make your point. If you do that then the terrorists have already won.
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

Place the blame where it is due...

[physicsphairy]

With Congress, the ones who engineered this incomprehensible beast of a code which is volumes long and confusing enough that even a large tax-filing corporation can get caught by it.

Personally, I don't see how anyone can reasonably expect to avoid becoming a criminal with more laws on the books than can possibly be read in a human lifespan. I am completely unacquainted with 99% of the laws in this country, and for all I know I may have unwittingly violated a fair portion of those.

The law should be terse enough for Joe Schmoe to learn it all in a high school class or in a few weeks of diligent study. Anything more is just plain unreasonable.

Re:Place the blame where it is due...

[Anonymous Coward]

Honestly
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 /.ers would need to fill out 1099-DIV, B, R, INTs, etc., though the majority of the population would not need to) as they're living paycheck to paycheck, and you know these people, as well as I do, considering that taking calls from these kinds of people all day does make it seem as through the consume a large portion of the population.

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!

[Brian Stretch]

No problem, we could switch over to the Flat Tax very quickly. Take your income, subtract your personal and dependent deductions (well over $40K for a family of four), and pay a percentage of what's left (usually 17% in American proposals). Besides saving $billions in labor, it will likely increase compliance as it will be less worthwhile to dodge it.

Unfortunately, reformers are split between the Flat Tax and Fair Tax, 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.

Re:Flat Tax!

[Dante333]

How is that fair? Bill Gates deserves to have more of his income confiscated because... Really I want to know. How is taking more money from someone just because they have it fair? On the flip side, how do you justify giving government benefits to someone who has not contributed? In 2003 the top 5% of income earners paid 54.36% of the income taxes. The top 10% paid 65.84%. The top 50% paid 96.54%. That means the bottom 50% of income earners paid a whopping 3.46% of all income taxes. The only way this would be fair is if you vote's weight was directly proportional to the amount of taxes you paid.

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 by Neal Boortz before you start ripping the Fair Tax 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.

The folly of corporate taxes

[Shivetya]

If anything this should give people a clue that the tax system is broken. Not only is it overly complicated it also a fraud perpetuated on the American people. It relies on ignorance and to some extent class warfare to continue in its current form.

Watch politicians. They will consistenly play up the fact that corporations don't pay their fair share while conviently relying on the fact that any taxes paid by a corporation are paid by its customers. It is this embedded taxaxtion that hides the true amount of tax load that is place on every citizen of the country. The best time to witness the hypocrisy of Congress is when certain corporations report their profit. The Congressmen will make big speeches about how all that money is being "stolen" from the American people and that the profits are obscene whereas the only obscenity is Congress's appetite for OUR money. They love to ignore the profit per share which is the true measure of a corporations profitability all because they know most Americans are ignorant of how the system works.

The system is made so complex to keep the dirty little secret from being easily identifiable. If the Congress and Administration were truly after true tax reform they would make the system transparent. This can be done in one of two ways. A flat tax or a National Sales Tax (aka The Fair Tax). While neither system is perfect they both offer something that the current system doesn't and that is transparency.

Besides being overly complex, which results in hundreds of billions from individuals and corporations to stay in compliance, it is chocked full of exceptions for every little group that manages to bend Congresses's ear. They have created a self sustaining system. Groups give money as gifts and reelection money to maintain their status. None of them have the people's intrest in their hearts, not Congress, not the Administration, and certainly not these groups.

It is a total fraud.

Re:Tax simplification

[anthony_dipierro]

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:Technology problems

[flug]

I apologize for posting AC but as you read below you'll see why . . .

This is a classical corporate decision making screwup.

HRB has for the past number of years distributed its tax prep. software* for its offices via CDs. Naturally given the nature of tax prep. software there are numerous updates over the course of the tax season.

(You realize of course that lots of federal & state tax changes & forms come down through November & December, but even as of Jan 1st of any given year, neither the IRS nor the states have all their tax forms for that year finalized . . . so any tax software must of necessity go through a process of continual updating throughout the tax season. That's just all part of the fun.)

In past years, HRB office's major software updates were sent out via CD and minor updates sent via network but had to be manually downloaded and applied.

Of course HRB had various problems with this system over the years--batches of CDs that were bad, local offices that didn't apply updates as they were supposed to. Just the normal very predictable kind of stuff. Plus there is lots of ticky upgrading stuff for local support people to do--going around sticking upgrade CDs in servers at various offices, etc.

So last summer HRB hatched the idea of rolling out automated download software. From the user's point of view in a local HRB office, this is a black-box bit of software that sits on the machine, automatically pulls the latest update from the HRB central server, and automatically updates all the needed software--not only the tax prep software but all the other necessary stuff like time clock, scheduling, point-of-sale, whatever.

When I heard about this plan for automated updates through the grapevine last summer I just about choked. And of course immediately predicted disaster. As did everyone else who actually understood the situation.

The HRB software is big. On the order of a full CD's worth of stuff or more for a major update, of which there are maybe 3 or 4 a year.

Most company-owned offices in urban areas have always-on broadband connections. So you could see this scheme working there (with good properly tested software, which it turned out this software download "tuner" was not).

Any network connection, even always-on broadband connections, are by their very nature of variable quality. And remember we're talking here about thousands of offices here in every conceivable part of the country and even overseas.

So you can imagine the type of problems that might crop up, especially if the autodownload software didn't recover well from errors (which it didn't), give the end user any information about its operation or errors it had encountered (which it didn't), or give the end user any way to recover from errors (which it didn't).

But lots of offices, e.g. in rural areas or franchises, are on 56K or lower (even MUCH lower--think *remote* rural areas) dial up connections.

To download a major update via dialup takes something like three days. And that is assuming all goes perfectly, which of course it never does.

Meanwhile since it is "black box" to the end user (don't want those pesky end users messing around with the innerds of our software!) the local HRB people don't even realize it is stuck 2% through the download and don't have any way to get it unstuck even if they did realize.

Getting it un-stuck involves calling into headquarters tech support, working your way through a few layers of that, then waiting for somebody from headquarters to remote into your office machine to issue the supersecret command to make the tuner reset itself on the stuck channel.

Meanwhile this fantabulous new download software was never really put through end-to-end testing. Yes, somebody must have more or less tried it out in a test lab somewhere, but nobody actually sat & tried to spend 3 days downloading a major upgrade over dialup from Oskaloosa to find out what might happen under realistic networ