More and more taxpayers are opting to file their returns themselves according to the IRS. This has been confirmed by H & R Block and Liberty Tax Services as well. Turbo Tax filings, on the other hand, were up for the most recent periods its consumers have reported return volume. “The risk in Turbo Tax is you really have to know and understand tax matters to understand if your return is right” says Kevin Thompson, CEO of Action Tax. “I can watch a video and build a house but I really don’t know enough about building to do that” said Thompson. “And I am not sure I want to live in that house either.”
Taxpayers do not understand that just because the return was accepted does not mean it is correct. “It’s not until they start to receive the CP2000 compliance correspondence that they realize that maybe Turbo Tax was wrong. And then it becomes expensive to unravel the mess they have created. And I suspect that house I’d build might stand but probably not pass inspection.”
The IRS also reported that the total number of returns received by the agency has dropped by 6/10ths of a percent to only 58.5 million, while the number processed, 56.9 million was down by 1% over last year. Tax returns that were e-filed by tax professionals fell to 28.7 million, down 4.4%. In contrast, self-prepared returns increased by 6%.
Liberty CEO John Hewitt says his company has seen 1/10% fewer customers through Feb 13 but also reports that his revenue is up. Block’s returns fell by 4.2% through Feb 28.
Block’s CEO blames the increase in do it yourself returns to people fraudulently attempting to seek Earned Income Credit Tax Credits. A taxpayer using a tax professional will be asked 27 questions while a Do it yourself customer is not screened at all.
Kevin Thompson, CEO of Action Tax relayed a story regarding a new client in the Redondo Beach office. Travis came in to work with our newest Action Hero, Valencia Campbell. When he arrived he said “I owe $1,200.” After Valencia completed his returns he was to receive a refund. Travis said “I could hug you right now.” Valencia was just doing what any Action Hero would do, “Making sure American Taxpayers pay their fair share of the tax burden and not one penny more.”