Frequently Asked Questions
- Is Your Approach Conservative?
- Audits?
- Will a Change in Pattern be a Red Flag? Can more deductions Trigger an IRS Audit?
- How long do I need to Keep my Records?
- Do you recommend The Roth IRA or Roth IRA Rollovers?
- Isn't my return "Simple"? Isn't it pretty much cut and dried?
- Payroll Departments & Withholding Errors
- Refund Results: Teachers - Just Show Me The Money!
- Why is it Difficult to Find a Good Tax Accountant?
- Beware of Low Cost Tax Preparation Services
- Beware of Low Cost Tax Preparation Software
- Beware of Low Cost Internet Tax Preparation Websites
- Protecting Your Privacy
- Governmental Representation
- Cellphone Policy
- IRS Fails Test
- IRS telephone information
- IRS publications
- H&R BLOCK Website
- NY City Sues H&R BLOCK Over Ads
- NY CPA’s Blasts H&R BLOCK for Deceptive Advertising
- H&R BLOCK to Pay $4M for Deceptive Trade Practices
- Companies on Tax Free-File Web Site Eyed H&R BLOCK Again
- H&R BLOCK loses bid for dismissal of IRA lawsuit
- NY Attorney General Spitzer: H&R BLOCK Knew of Bad Advice
- ENRON FRAUD AT H&R BLOCK
- The Turbo Tax Question: Can You Save Me Money?
1. Is Your Approach Conservative?
All deductions are backed up by code sections, court cases, etc. Of course, the attitude and position of the client are taken into consideration during preparation of the tax return.
Of all of the tax returns prepared by Robert Greene in his entire professional career, not one was referred to a lawyer to go to tax court, and not one ever had to go to an audit appeal. The rate of audits is very low, a fraction of the national average. All audits resulted in a decision of "No Change" (or a very small change) to the original tax return prepared by Robert Greene. He has also represented taxpayers whose returns he did not prepare. All of those also resulted in "No Change."
This outstanding record is the result of careful work in the preparation of the tax returns, utilizing every deduction the law allows, reasonable estimates, skillful strategy. Robert Greene teaches his clients how to document the legitimate deductions they claim. Year by year they improve their recordkeeping, and the deductions increase.
3. Will a Change in Pattern be a Red Flag? Can more deductions Trigger an IRS Audit?
No. Here's why:
- One year you could be earning a salary of $75,000 per year.
- The next year you could be self-employed, earning $25,000 per year.
- The next year you could be in a mental institution, earning -0-.
- The next year you could be earning a salary of $500,000 per year.
- The next year you could be in a prison, earning -0-.
- The next year you could win the lottery of $10,000,000.
- The next year you could be on the beach in Tahiti, earning -0-.
- What does this pattern mean?
- Absolutely Nothing.
Only that people's lives can change from year to year.
The IRS does not even waste their time tracking the pattern or year to year relationship of the numbers, because they know the results of that type of analysis would be meaningless.
However, the IRS does compare individuals to their occupational group. Teachers, nurses, chiropractors, police all fit within distinct occupational groups, and can be compared to their peers. However, all variations from the norm do not automatically result in an audit. People can be very different, and therefore, their tax returns can vary widely.
Anyway, the best approach is to be able to document all, or most, of the deductions claimed on the tax return.
4. How long do I need to Keep my Records?
You should keep your Tax Return, W-2, and IRA information documents until 3 years after you are dead.
You may need your W-2 for Social Security benefits.
They may make mistakes in your records. You can correct them only if you possess the actual documentation.
You may need information to support the partially tax free status or fully tax free status of your IRA withdrawals.
You should keep documentation regarding the original cost and dividend reinvestments of stocks and mutual funds.
The actual checks and receipts to support claimed deductions can be discarded 6 years after the return is filed.
5. Do you recommend The Roth IRA or Roth IRA Rollovers?
Important Government position/tax changes to think about:
A. Native Americans/Indian Treaties:
Many deals were made. The United States government did not keep any promises, except to take the land, then did not honor any agreements. Instead, it engaged in systematic attempts to kill the people to whom it had obligations.
B. Social Security:
Social Security benefits were originally tax free. Then they were made 50% taxable. Then they were made 85% taxable. What comes next?
C. Student Loan Interest:
Used to be deductible. Without any grand fathering provisions, without any warning to individuals in school, the deduction was eliminated.
D. National Parks Lifetime Pass:
For the lifetime of the card holder (who paid a special fee for the card), free admission to National Park Service facilities, for the cardholder and anyone in their vehicle. This was printed on the card. One year later, it was changed by Congress, with no retroactive provisions.
E. IRA:
Remember when IRA meant simply Individual Retirement Account? When that program was first introduced, there was no Non-Deductible IRA, Roth IRA, Education IRA, and all the complexity of married/single, income limitations, etc.
But, somehow, over the years, things changed, the laws got more complicated, the politicians who instituted the original IRA are now gone, new politicians, who do not remember the original concept, vote for and pass new tax laws.
F. Roth IRA:
In 1999, the current tax law was that future withdrawals of principal and earnings from Roth IRA accounts will all be tax free. Great!
In the future, new politicians will be elected, who will forget about the "deal", who never understood the agreement, who have no committment to the tax free status of withdrawals from Roth IRA accounts. When they make deals in Washington, D.C. to balance and pass the annual federal budget, they always say, "Everything is on the table", its all up for negotiation. Sooner or later they may trade away the tax free nature of Roth IRA withdrawals. It is very difficult to do long term tax planning. Maybe it is a good strategy to take the deduction for a traditional IRA now, if you have the option.
What adjustments and refinements of this program can we expect over the next 20 to 30 years?
G. Traditional IRA vs. Roth IRA:
Remember, a bird in the hand is worth 2 in the bush. If you have a choice, take the tax deduction now for a traditional IRA. Otherwise, the Roth IRA is better than the Non-deductible IRA. I don't recommend Roth Rollovers.
6. Isn't my return "Simple"? Isn't it pretty much cut and dried?
Do you think the fields of medicine or law are "cut and dried"? There are various tax deductions, alternative tax strategies, constantly changing laws and regulations, always new court cases, different interpretations and understandings.
Nobody knows every detail of the voluminous and complex tax code. But formal education, professional experience, professional credential with mandatory continuing education requirement help ensure the delivery of a quality service which can positively and directly affect how much tax you pay, and how much money you keep.
Fifteen minutes or a half hour is not enough time to ask questions, elicit responses, then clarify and quantify the results. Robert Greene always starts new clients with a one hour appointment. This is necessary to get a full understanding of the tax aspects of their lives, then create the structure of the tax strategy and tax return.
Anybody who thinks their return is "Simple" is probably missing the opportunity for many tax deductions, and significantly overpaying their taxes.
There are many legitimate tax deductions which are commonly overlooked, and are in various locations on the tax return.
Frequently overlooked deductions are omitted from the returns of teachers, doctors, chiropractors, massage therapists, lawyers, truck drivers, various salaried individuals, self-employed individuals (see HireYourSpouse.Com).
Frequently overlooked deductions may be medical, charitable, employee business expenses, investment expenses, self-employed expenses, real estate expenses. Each of these areas has legitimate tax deductions most people (and most tax preparers) have never even heard of, nor considered, or their application is weak.
There is a whole menu of tax credits. There can be several acceptable and correct ways to handle a situation or transaction. Which way saves taxes? Which way can provoke an audit?
With the complexity of the tax code today, NOTHING is "SIMPLE"! And NOTHING is "Cut and Dried"! So, Do Not Use The "S" Word! Don't even Think about it!
7. Payroll Departments & Withholding Errors
The clerical employees of a payroll department are not specifically trained for this job, do not have specific educational requirements for the job, are not well supervised, and have high turnover. Mistakes and under-withholding problems are very common. Their mistakes become your problem.
Knowing this, employees must act defensively. They must retain all pay stubs, and keep records of all payments and withholdings. This is the only way to verify the accuracy of the Form W-2 at the end of the year.
In the unlikely event of a bankruptcy or closure of your employer, you may not get a W-2. Your records of federal and state withholding can become very important.
Also, to prevent under-withholding problems surfacing after year end, at tax time, when the employee and accountant are both powerless to respond, the defensive and responsible employee and accountant should evaluate the adequacy of the federal and state withholding. The withholding percentage should be compared to the effective tax rate, rather then the tax bracket. In conservative planning, there should be some extra withholding so that the taxpayer is comfortably safe, not in danger of a large (surprise!) tax bill on April 15th. An extra $20 of withholding per week will not affect most people. This is insignificant, pizza and ice cream money. Accumulated over the course of an entire year, it will add up to $1040. This can make a positive difference at tax time, especially if the husband and wife both do it.
At the accounting offices of Robert Greene, CPA, we specialize in preparing tax returns for educators. We did a short evaluation of refund results for 93 W-2 salaried teachers’ 2003 tax returns prepared by Robert Greene, CPA, CMA in 2004. These are the results:
- For 41 married teachers, the average refund (federal and state combined) was $6,800.
- For 52 single teachers, the average refund (federal and state combined) was $3,700.
- fEvery single one of these returns had a net refund, Federal and state combined.
These tax returns represent a mix of new and returning clients, with normal tax withholding throughout the year. Of course, some returns will be above or below these averages, due to various factors.
For new clients, these refunds are a dramatic improvement over their results of the prior year, with another tax return preparer or self-prepared.
For returning clients, these refunds are considered normal.
These results are not accidental or unusual. They are the result of careful work.
Each of these tax returns is supported by adequate documentation, and can be defended by Robert Greene CPA, in the unlikely event of an audit. Clients are encouraged, instructed and assisted to improve documentation and record keeping.
Robert Greene, CPA carefully studies the tax law passed by Congress, the rules and instructions from the IRS, court cases decided by judges, 600 page books specifically for teachers, and other tax literature. These change every year. The challenge is to apply this information to the real world of clients’ individual income tax returns - in the most advantageous way possible.
This is not a joke: For you and your family, this may be the most financially important paper you have ever read. Save this paper with your tax documents. Visit the websites shown above. Print the relevant material and read carefully. Contact Robert Greene, CPA for your next tax return.
Robert Greene, CPA uses his knowledge skillfully to produce these results.
Maximize your refund by minimizing your taxes.
9. Why is it Difficult to Find a Good Tax Accountant?
After college accounting school, the new graduates naturally want to find a good job to start their career.
The “Big Four” very large international CPA accounting and auditing firms offer higher salaries with more prestige to the upper strata of graduates, those with the best grades and from the most prestigious schools. The majority of their staff works exclusively on large audits of large corporate clients. They will try to advance to become a partner in those large firms, or join the controller’s staff in a large corporation who is a client of the CPA firm. Eventually, the accountant could rise to become the Chief Financial Officer (CFO) of a major US corporate org- organization. Most of these accountants have only audit experience and no tax experience, or only exposure to the corporation tax returns of large “C” corporations. Small local businesses are almost always “S” corporations, a very different type of tax structure, despite the similarity of their names.
The middle strata of graduates, those from middle level schools, or those with mediocre grades, will obtain jobs in small local CPA firms. They will eventually try to become a partner in those small CPA firms, or a controller of a local business. Small firms offer the most diverse professional experience, including accounting, auditing, and exposure to all areas of taxation.
Some graduates go directly into corporate accounting, getting no CPA or tax experience. They can not become a CPA without getting public accounting experience. They also will probably not rise to the top of their profession without that professional credential. Naturally, the middle strata salary range is lower than the upper strata.
The lower strata of graduates from accounting school, will accept lower paying positions as accounting clerks, lower paying positions with small governmental units (no offence to anyone), or jobs in other fields. They will not get any professional tax experience.
These are the common career paths of CPA’s. Naturally, the best and the brightest usually go to large firms with the highest salaries and rich benefit packages. The really sharp tax accountants focus on large corporate taxation or very wealthy families, those who pay large fees and support high salaries.
To be a local sole practitioner of accounting or taxation, an accountant must start a practice with very few clients, and work to hone skills, establish a client base and a positive reputation for 10 to 15 years before he can make a comfortable living.
Many of the local tax practitioners in an area are not really CPA’s. They may have an MBA or a college accounting degree, but no professional experience in a CPA firm. If they have experience in a CPA firm, why did they not obtain the CPA credential? They cannot pass the difficult CPA exam. If they are not CPA’s, they do not have a requirement from the State Education Department to maintain their professional skills through continuing professional education. CPA’s are required to obtain at least 40 hours of continuing education per year.
For the public, it may be difficult to find a good tax specialist accountant. Most CPA’s have a general practice of accounting for local businesses, and tax preparation is a complex and less desirable part of that practice. A client who wants a tax return prepared for a few hundred dollars, once per year, is not as desirable or profitable as a local small business with needs for professional service year round.
Also, these generalist CPAs spread their continuing education between the various areas of auditing, financial and cost accounting, corporate and individual taxation, financial planning, management consulting, computer technology, client psychology, personal improvement, etc.
Very few CPA’s actually specialize in the field of taxation. It is less desirable because the stream of income is not consistent throughout the year, and after becoming successful in that practice, the accountant has an increasingly stressful tax season every year!
Meanwhile, the true tax accountant faces competition from “tax preparers” such as H & R Block, knockoffs and wannabees, anybody who can buy a cheap computer, load a simple program, enter a few numbers, and – Voila! An official looking return spits out of a printer! Neither the preparer nor the taxpayer has any idea if it is correct. Nobody even thinks or cares whether the tax paid is the lowest legal amount, or if different strategies should be considered.
These are some of the difficult factors causing the normal bell curve, found in any field of human endeavor, to be skewed downward, with fewer accountants in the upper excellent range.
Considering that the yearly tax return is an individual’s most important annual financial document, the choice of a tax accountant is a critical financial decision for each taxpayer. They should consider very carefully whether they want to entrust their financial security to someone who is not a CPA, not regulated by the State Education Department’s continuing professional education requirements, as well as its ethics requirements; or someone who does not specialize in taxation.
For most Americans today, a talented, experienced, tax accountant can be difficult to find. Those with critical thinking skills, and a deep understanding of Tax Strategy and Structure, with the initiative and ability to communicate that to clients, are even rarer still.
Best wishes from Robert Greene, CPA, CMA.
Copyright 2007 Robert Greene CPA CMA, Tax Strategies Inc. www.RobertGreeneCPA.com. Rev. 10/26/07
10. Beware of Low Cost Tax Preparation Services
Surprise!
The purpose of these low cost services is not to save you money by preparing your taxes in the most skillful way possible, utilizing every legal deduction and strategy available to you.
They need to make money in some way, and they will make a large amount of money.
How do they do it?
What is their real motivation?
Low Cost Tax Preparation Services:
These operations typically pay their staff $7 to $10 per hour, with a small amount additional for each return they prepare. The profitability of the business does not result from tax preparation fees. Instead, the real money comes from the sales commisions on insurance and investments, such as high front load mutual funds and IRA's.
Since this is the real source of their profits, and therefore their real motivation, they are really not interested in every tax saving technique available. They simply want to get the return in and out as fast as possible, spending the minimum amount of time possible. (They say: "Git'em in, git'em out!")
These "tax preparers" may have very little or no formal education in accounting or taxes, little or no professional experience, little or no tax-related continuing professional education on an annual basis, and usually no professional credentials.
Their clients typically pay more taxes than they really should. These tax preparers don't know, and really don't care.
11. Beware of Low Cost Tax Preparation Software
These software packages allow people to prepare their own return. Or some people prepare their return manually, the old fashioned way. This is the most expensive mistake a person can make in a year!
Unless you are committed to studying the tax law continuously, and keeping abreast of the law changes and results of court cases which might affect you, you will not know what is deductible and what is not. You will not be able to benefit from various strategies and techniques which an experienced professional could utilize. You may not realize that certain words may incorrectly characterize your expenses as non-deductible.
People using these inexpensive tax programs usually pay more taxes than they really should, because they do not know every deduction the law allows, or how to take advantage of them.
You may be most familiar with the details of your own life. You may save a small amount of money in annual professional fees, but you are definitely paying more in taxes than you need to. You prepare one tax return yearly. In twenty five (25) years, Robert Greene, CPA has done thousands.
With the complexity of the tax code today, you must really give careful consideration to the decision to prepare the return yourself.
Of course, you can do your own dental, legal, plumbing, electrical, automotive and TV repair work, too! But why don't you? Maybe the risks outweigh the benefits? ... Technical considerations?
Why prepare your own return to save a few bucks in fees? Your most important annual financial document will then be prepared by a "tax preparer" with no professional training, experience or credentials? Is this wise?...Or is it penny wise and dollar foolish?
(Robert Greene's clients include Certified Financial Planners, corporate accountants, and accountants with masters degrees in accounting. Even they do not want to prepare their own return. They prefer to have Robert Greene do it for them.)
12. Beware of Low Cost Internet Tax Preparation Websites
Surprise!
The purpose of these low cost websites is not to save you money by preparing your taxes in the most skillful way possible, utilizing every legal deduction and strategy available to you.
They need to make money in some way, and they will make a large amount of money.
How do they do it?
What is their real motivation?
These websites allow people to prepare their own return. This is the most expensive mistake a person can make in a year!
Unless you are committed to studying the tax law continuously, and keeping abreast of the law changes and results of court cases, you will not know what is deductible and what is not. You will not be able to benefit from various strategies and techniques which an experienced professional could utilize. You may not realize that certain words may incorrectly characterize your expenses as non-deductible.
The profitability of the website does not result from tax preparation fees. Instead, the real money comes from the sales commisions on insurance and investments, such as high front load mutual funds and IRA's. Also, they can make money from selling confidential information about you...
Since this is the real source of their profits, and therefore their real motivation, they are really not interested in every tax saving technique available.
People using these services usually pay more taxes than they really should, because they do not know about every deduction the laws allows, or how to use them.
Why disclose your personal financial information to a website company, when you do not really know what they will do with your information?
Why prepare your own return to save a few bucks in fees? Your most important annual financial document will then be prepared by a "tax preparer" with no professional training, experience or credentials? Is this wise? ... Or is it penny wise and dollar foolish?
Tax professionals, like all providers of personal financial services, are now required by law to inform their clients of their policies regarding privacy of client information. Our firm has been and continues to be bound by professional standards of confidentiality that are even more stringent than those required by law. Therefore, we have always protected your right to privacy.
Types of Nonpublic personal Information We Collect:
We collect nonpublic personal information about you that is provided to us by you or obtained by us with your authorization.
Parties To Whom We Disclose Information:
For current and former clients, we do not disclose any nonpublic personal information obtained in the course of our practice except as required or permitted by law. Permitted disclosures include, for instance, providing information to our employees, and in limited situations, to unrelated third parties who need to know that information to assist us in providing services to you. In all such situations, we stress the confidential nature of information being shared.
Protecting the Confidentiality and Security of Current and Former Clients’ Information
We retain records relating to professional services that we provide so that we are better able to assist you with your professional needs and, in some cases, to comply with professional guidelines. In order to guard your nonpublic personal information, we maintain physical, electronic, and procedural safeguards that comply with our professional standards.
Additionally,
The tax and financial practice of Robert Greene, CPA, CMA does not now, and never has, disclosed any information to anyone. Our computers are not linked to any other computer system outside our office. We do not rent or sell mailing lists, nor engage in cross-marketing activities. We have never had information released under subpoena, or any other court or legal requirement. We do not discuss our clients’ confidential matters outside the office, even with spouses. We maintain complete confidentiality. If examples of real life situations are sometimes used, it is never done with actual names, only anonymously.
With the client’s specific authorization and instruction, we have shared information for the specific purpose of assisting the client in securing a mortgage, car loan, cooperative apartment, or other business transactions.
14. Governmental Representation
Our professional practice assists clients who have various problems with the IRS, various state departments of taxation, or other governmental entities. These issues are separate from the practice of tax return preparation, and are billed separately, at our standard rate of $150 per hour, paid as a retainer, in advance. We try to get results as expeditiously and efficiently as possible.
However, clients must understand that this may be a long, time-consuming process, rather than an instant fix. We need to first understand the situation. We first review and analyze the client’s filed tax returns, supporting documentation and governmental correspondence. Then we prepare 3 copies of a tax power of attorney and request a transcript of the taxpayer’s account from the government, and analyze that. Then, with all the information available, we evaluate the client’s position, develop the best strategy for solving the problem, and communicate that to the client. Every step in the process must be documented in our files.
Sometimes, just for us to get a response to a letter, we must wait for one to two months. Some transcripts can be mailed to our office in one to two weeks. We cannot control the responses and turnaround times of governmental units.
We maintain a professional relationship with the IRS and other governmental entities. We are polite and respectful, not antagonistic or insulting. This is the proper way to serve our clients’ best interests, and secure the cooperation of other parties. Some of the representatives of the government, we know by name.
The vast majority of the problems we solve, are not problems we created. We resolve issues in many states, by telephone and fax, without the necessity of a personal appearance.
Some of the issues we resolve are:
- Errors on prior tax returns requiring an amended return
- Audits
- Audit Appeals
- Offers in compromise
- Payment plans
- Problems with employment taxes
- Problems with sales taxes
- Penalty abatement
- Late subchapter-S elections
- Responses to letters from various governmental units, etc.
We function on the Federal level representing clients before the IRS, at the state level dealing with the state department of revenue in any state, and with any other governmental entities.
In the past, we have been very successful in resolving problems in our clients’ best interest. However, past performance is no guarantee of future results. Like lawyers, we cannot guarantee total success in every situation. It would be unprofessional to do so. However, we can promise to make our best effort, to utilize our extensive resources, knowledge of tax law, negotiation skills, and years of experience with the tax system, to try to solve a problem as promptly and economically as possible. Also, we need the understanding and cooperation of our client.
Please Turn Your Cell Phone Off and Be here now, with me, and I will be here now, with you.
We have a limited amount of time with each other at this appointment.
Use it wisely.
Please put all of your relevant papers - for this year only - on the table.
Take a deep breath and relax.
Maintain your focus on the task at hand.
We have work to do, together.
Thank you for your cooperation.
Please let me know when your cell phone is off and you are ready.
Released 3/28/2004
16. IRS Fails Test: Tax Questions Stump the IRS Staff
April 15 is looming, and many Americans are calling 1-800-829-1040, going to www.irs.gov or visiting one of the 400 IRS Taxpayer Assistance Centers with their tax questions. Unfortunately, the IRS staff may not give the right answers.
Treasury Department auditors visited some of those centers, posing as taxpayers seeking help with basic questions. Errors were made on 19 of 23 returns (83%). Why? The staff did not check IRS publications to determine eligibility for deductions, or faulty software led to errors. But don’t just blame the IRS: Congress writes those complex tax laws, though few members do their own taxes.
- Parade Magazine, page 8, 4/11/2004
The moral of the story?
It is a great mistake for you to rely on the IRS front-line staff for guidance in preparing your income tax return. They are not there to help you minimize your taxes. Their real purpose is to collect taxes. Surprise! They do not have training nor experience in sophisticated tax reduction strategies.
If you want to minimize your taxes, you must go beyond a simple tax preparer, and find an educated and experienced CPA, who specializes exclusively in taxation, who is flexible in his thinking, and is well versed in tax reduction techniques and strategies.
Robert Greene, CPA, CMA is that rare individual.
The IRS has released the results of its own survey:
47% of the information given out by the IRS telephone staff is WRONG!
This same fact has been reported in numerous surveys and studies over the years, reported in Money Magazine, Consumer Reports, and the American Institute of CPA's. The IRS telephone line is not the source for accurate information, which can reduce your taxes.
Robert Greene CPA has found that in some IRS publications there are inaccuracies, due to changing IRS policies or regulations, and the publication is not up to date. This may result in taxpayers not taking all of the deductions they are legally entitled to, and therefore paying more tax than they really should.
There are inaccuracies regarding certain deductions on this website. This may result in taxpayers not taking all of the deductions they are legally entitled to, and therefore paying more tax than they really should.
(However, this company has not engaged Robert Greene CPA to review their website for inaccuracies and corrections, to ensure that their clients pay the lowest possible tax.)
20. NY City Sues H&R Block Over Ads
Suit: Refund campaign preys on poor
Published by Newsday, Inc.
By Henry Gilgoff
STAFF WRITER
March 28, 2002
In H&R Block's marketing for its new refund-anticipation loan, advertising for Instant Money towers on billboards, rushes by on city buses, reaches out to TV couch potatoes, and fills many store signs.
In State Supreme Court, the promotion is included in a suit the city Department of Consumer Affairs has filed against the giant tax preparation operation alleging deceptive advertising and other violations of city law.
Gretchen Dykstra, city consumer affairs commissioner, voiced concern yesterday that many consumers signing up for the tax-preparer arranged loans, based on their anticipated refund, are low-income, qualify for an Earned Income Tax Credit and can ill afford to sacrifice any money for bank fees.
"I think it's unconscionable that you would take from poor people a big bite of the little they have," Dykstra said. The finance charge for Instant Money was $39.95 for a $500 loan, with an estimated 224 percent annual percentage rate, according to a recent bank application, and $99.95 or an estimated 56 percent on a $5,000 loan. The fees are in addition to those paid for tax preparation and electronic filing.
The Kansas City, Mo.-based H&R Block responded in a statement yesterday that it believes the city agency's suit stems more from its "dislike of Refund Anticipation Loans in general than with operational issues relating to H&R Block specifically."
The company said that the Instant Money offer is new this year. But the legal battles between the city and H&R Block over refund-anticipation loan marketing has been ongoing for years. The city suit charges that the company has violated a 1997 settlement and four prior agreements. It was part of a rash of litigation, including a class-action suit that is pending.
In the 1997 settlement, the company paid a $200,000 fine and $50,000 for city costs, and said that the agreement should not be construed as conceding any "intentional violation" of city laws. This month's suit seeks a permanent injunction against alleged violations and unspecified fines.
The Instant Money offer was described yesterday on the company Web site: "With Instant Money from H&R Block, you can get a loan for the amount of your federal income tax refund, up to $5,000, within minutes of applying."
Susan Kassapian, special counsel for the city agency, said the smaller print used in advertising to disclose that the "Instant Money" is a loan violates a city mandate for conspicuous disclosures.
The suit also alleges that the advertising fails to conspicuously disclose that "only a small percentage of consumers qualify" for Instant Money. According to the company, nearly 30 percent of applicants have qualified. Consumers rejected are offered other options, including less expensive loans, the company said.
In random calls made to H&R Block offices in the city, including Queens, the suit charges, employees "continue to steer" customers to the bank-related products, as they allegedly did last year. The city last year issued more than 2,000 violations and began negotiations that failed to reach a resolution, with each side blaming the other yesterday.
Copyright © 2002, Newsday, Inc.
21. NY CPA’s Blasts H&R Block for Deceptive Advertising
By David Cho, published by NYSSCPA.ORG
NEW YORK (March 22, 2001)--The New York State Society of CPAs is blasting tax preparation giant H&R Block for airing misleading ads implying that the company's tax preparation services are superior to those of CPAs.
Citing the ads claiming that Block prepares "more complex tax returns than any CPA firm in America" as misleading and detrimental to consumers, Society President P. Gerard Sokolski sent a letter to New York State Attorney General Eliot Spitzer last week asking the state's top attorney to investigate the ad's claims.
"We would appreciate an investigation into this matter as quickly as possible," Sokolski wrote. "This campaign is saturating the New York market during the time of year when consumers are choosing their tax preparers."
Spitzer, whose recent actions have included the indictment of 20 defendants in a $50 million boiler room stock fraud scheme, has not yet commented on the Society's request.
Block is no stranger to defending the claims of its ads in court, having lost a recent case brought by Liberty Tax Services in a false advertising case in Virginia. The judge held in the Liberty case that Block acted "willfully, maliciously and in bad faith" by portraying its no additional charge refund anticipation loan program as a tax refund.
Federal Judge Raymond Jackson ruled that the advertising for Block's Rapid Refund service in Virginia last year was deceptive and awarded rival tax preparer Liberty Tax Services damages in the amount of $506,000 plus legal fees.
The media took the opportunity to criticize Block's business practices. "What's really sad is that Block's Rapid Refunds, which sometimes carry annual percentage rates as high as 500 percent, deliver money just a few days faster than the Treasury Department's electronic payment service" said SmartMoney.com's Robert Hunter earlier in the month. "Talk about gouging the needy."
While the accuracy of its claims are in dispute, Block's advertising seems to be effective. The company reported net profits of $5.6 million, or 6 cents a share, for the quarter ending Jan. 31, which compared favorably with its $7.1 million loss (7 cents a share) during the same period a year ago. The company attributes the gain to unexpected third quarter profits reflecting taxpayer use of its services earlier in the year.
Block beat Wall Street expectations, which predicted a loss of 20 cents per share, according to research firm First Call/Thomson Financial, and is also beating its software rival, Intuit, which announced a cut in third-quarter and 2001 sales estimates last week because of lower-than-expected earnings on accounting software.
22. H&R Block to Pay $4M for Deceptive Trade Practices
Source: Associated Press
Publication date: 2002-12-12
NEW YORK (AP) - Tax return preparer H&R Block will pay $4 million in a settlement for engaging in deceptive trade practices involving more than 61,000 low-income customers, New York City's commissioner for consumer affairs announced Thursday.
"We've seen the end of H&R Block exploiting poor people," Commissioner Gretchen Dykstra told a news conference.
As part of the settlement, the nation's largest tax preparation firm will offer more than $2.7 million in restitution to 61,700 New York customers, in the form of $35 mail-in rebate coupons that can be used toward tax preparation or redeemed for cash. Of those customers, 17,500 will receive two coupons.
The city sued H&R Block in March, charging the company offered misleading information about loans with high interest rates to customers who could anticipate a tax refund.
Dykstra said her department objected to H&R Block ads that which promised "no faster way to get your money." In fact, Dykstra said, a tax refund can be obtained in as little as 14 days if filed electronically with the Internal Revenue Service.
Denise Sposato, a spokeswoman for Kansas City, Mo.-based H&R Block, said it is retraining receptionists who erred in failing to tell some people about the IRS electronic refund system.
Beyond the restitution coupons, the rest of the settlement money will cover fines and the cost of an independent monitor to oversee H&R Block's advertising and training materials.
The money also will finance a city campaign that informs working people that they may be eligible for a credit on their taxes or cash refunds from the government. H&R Block is offering a similar informational campaign, Sposato said.
The Associated Press News Service
Copyright 2002 by The Associated Press
All Rights Reserved
23. Companies on Tax Free-File Web Site Eyed H&R Block Again
Source: Associated Press
Publication date: 2003-04-02
WASHINGTON (AP) - Some senators want to block companies that offer free tax preparation software through the Internal Revenue Service from selling other financial products to users from the free-file Web site.
"I don't think the government ought to be in the business of facilitating the solicitation of taxpayers," said Sen. Jeff Bingaman, D-N.M. He said he will push legislation "if Treasury won't correct the problem themselves."
The Treasury Department agreed to look into the situation after consumer groups said companies that provide the free tax preparation software improperly use taxpayer data to market mortgages, investment products and other tax services.
Nina Olson, the IRS' taxpayer advocate, said companies marketing their other products through the free filing services technically comply with laws that guard the privacy of taxpayers.
"I think that they're legally in compliance. It's whether everybody's working within the spirit of the law," Olson said. Senate Finance Committee Chairman Charles Grassley, R-Iowa, said he will call the companies in for a hearing if a committee study indicates a problem.
Prompts offering financial services in the H&R Block free filing service spurred the first complaints from consumer groups. An informal survey by the taxpayer advocate showed similar solicitations in TurboTax software. The office said most of the 17 companies that offer free tax preparation software through the IRS Web site market some kinds of services to their users.
IRS officials said the companies needed incentive to participate in an IRS initiative to get 80 percent of taxpayers to file electronically by 2007.
There has to be a profit motive or a business motive for these companies that participate," said Dale Hart, a deputy IRS commissioner.
H&R Block said users can choose not to get solicitations, and their software complies fully with laws prohibiting the use of a taxpayer's information by requiring that users consent twice before getting information about other products.
Consumer groups say users may not realize they are giving their consent to share tax return data when a program asks them if they want to get tax tips or additional information.
"They don't have a big sign, 'This is the consent form for giving up your privacy,"' said Jean Ann Fox, director of consumer protection at the Consumer Federation of America.
24. H&R Block loses bid for dismissal of IRA lawsuit
Thu Jul 12, 2007 8:22pm EDT
By Jonathan Stempel
NEW YORK (Reuters) - H&R Block Inc. (HRB.N: Quote, Profile, Research) has failed to win the dismissal of a lawsuit by former New York Attorney General Eliot Spitzer accusing it of fraudulently marketing Express IRA retirement accounts that caused hundreds of thousands of mostly lower-income clients to lose money.
New York State Supreme Court Justice Karla Moskowitz let the state pursue allegations of fraudulent and deceptive business practices and breach of fiduciary duty against the largest U.S. tax preparer's H&R Block Financial Advisors Inc. unit.
In a decision dated July 9, 2007 however, the justice excused the corporate parent and five other units from the lawsuit, saying she lacked jurisdiction or that the state failed to make its case. She also threw out a claim alleging common law fraud.
H&R Block, based in Kansas City, Missouri, said on Thursday the remaining claims lack merit, and that it plans to appeal.
Jeffrey Lerner, a spokesman for current state Attorney General Andrew Cuomo, said his office is disappointed that the justice dismissed some defendants and is assessing its options, but is "gratified" that the case will continue.
"As the opinion makes clear, the Express IRA is a New York product, and the Attorney General has the power to seek injunctive relief and restitution for all the victims," he said.
Spitzer, now New York's governor, had sought $250 million of civil penalties, among other remedies.
In his March 2006 complaint, he had accused H&R Block of steering roughly 500,000 clients to Express IRAs nationwide, but failing to disclose hidden fees that often more than wiped out the interest that could be earned.
The complaint said the median account had a $323 balance. Investors, it said, often failed to earn enough interest to offset such charges as a $10 annual maintenance fee, a $15 set-up fee, a $15 "re-contribution" fee and a $25 termination fee.
Moskowitz said the attorney general had adequately alleged deception or fraud by alleging H&R Block Financial Advisors "failed to disclose excessive fees" and "affirmatively misrepresented" the value of an Express IRA.
"The only fee disclosed in writing prior to the customer's decision to open an (Express IRA) is the $25 closing fee," the justice wrote. "These statements are not mere 'puffery' because, in this instance, the targeted consumer would not reasonably know that these statements were an exaggeration."
H&R Block shares closed on Thursday down 1 cent at $22.43. They have fallen 3 percent this year. The company disclosed Moskowitz's decision after U.S. markets closed.
25. NY Attorney General Spitzer: H&R Block Knew of Bad Advice
May 10, 2006 (Associated Press) — New York Attorney General Eliot Spitzer on Monday said he has evidence that H&R Block executives not only knew they were pushing customers to buy money-losing retirement account plans, but penalized employees who refused to recommend them.
Spitzer amended his March 2006 suit against the giant tax preparation company with copies of e-mails that he said show managers disregarded complaints from tax preparers about misleading marketing of the retirement product called Express IRA. The internal documents also showed that tax preparers were told "sell more IRAs" or "there's the door."
The company said in a statement that it will be "vindicated once we've had our day in court."
"The company looks forward to the attorney general's office presenting its case in court rather than through the press," stated the Kansas City-based company. "That the attorney general's office has chosen to ignore the facts, rely on information taken out of context, and continue to attack our company and our product seems tailored to objectives other than the merits of this case."
Spitzer is a Democratic candidate for governor.
In March, Spitzer filed a $250 million fraud suit accusing the nation's largest tax preparation service of steering more than 500,000 customers into a money losing retirement account plan. Spitzer said Block advised clients to buy an "unsuitable, fraudulently marketed, poorly performing, fee-ridden 'retirement vehicle' called the Express IRA," an account that actually shrinks over time.
Court papers say the amount of money in the retirement account decreases because the only investment option is a money market account with an interest rate so low that it does not cover the fees - "fees that H&R Block fails to adequately disclose."
H&R Block in March issued an immediate and strong reply saying the company will "fight vigorously to defend the Express IRA product and ensure it remains available to our many clients who rely on it as a helpful savings option."
"In addition to designing a flawed product with hidden fees and marketing it fraudulently to unsuspecting customers, senior management did more than simply ignore the concerns of its tax preparers; management penalized H&R Block tax professionals who refused to push the product," Spitzer said.
The attorney general's lawsuit seeks to stop the company from engaging in any fraudulent practices, force it to return profits and pay damages and restitution caused by its alleged scheme, and pay civil penalties in an amount no less than $250 million.
Spitzer said that H&R Block opened more than half a million Express IRA accounts in the last four years. He said 85 percent of customers who opened the accounts paid H&R Block more in fees than they earned in interest.
More than 150,000 customers closed their accounts, incurring additional undisclosed fees and almost $6 million in tax penalties, Spitzer said.
MICHAEL GORMLEY (Associated Press Writer)
The NASD has charged H&R Block Financial Advisors with fraud related to the sale of over $16 million worth of Enron bonds to more than 800 customers immediately preceding Enron's bankruptcy in 2001.
27. The Turbo Tax Question: Can You Save Me Money?
Every year, somebody calls me on the phone and says: "I have already prepared my annual tax return using Turbo Tax. I already know I have a $500 refund coming from the Federal and State returns combined. If I have you prepare my tax return, am I going to get the same result, but ultimately lose money, because I have to pay your fee?"
I am not offended. I always answer the same way: No offense, but who prepared your return? Someone with no professional education, experience or credential. That inexpensive computer program cannot replace skill and knowledge. This is my profession, and my art form. This is all I do, day in and day out, for 25 years. All of my continuing professional education is targeted in this specialized and changing area. Very few CPA's specialize exclusively in the field of taxation.
My clients are not stupid money-wasting fools. They are smart people, who know not to do their own dental work, not to repair their own video camera, and not to prepare their own tax returns. (My clients include tax lawyers, CPA's, MBA accountants, certified financial planners, smart teachers, doctors, lawyers, and sharp busines entrepreneurs.) They get what they pay for: Tax returns prepared, at a reasonable cost, in a tax efficient manner, taking advantage of all the opportunities the law allows, to minimize their tax. So far, I can tell you, every single time this scenario has unfolded, I have prepared a proper and advantageous tax return, delivering to my client larger refunds by at least $1,000, and usually more.
My clients benefit from my education, knowledge and experience. They are consistently satisfied, and return the next year, by over 95%. Safety? In 25 years, I have never had a client lose money because of a tax audit. You're the boss. Your decision will not change my lifestyle, nor hurt my feelings. Please review my website and make the decision that is right for you and your family. My knowledge and skills are available to you, for a small cost, and potentially a Large Benefit.
Real-life example #1:
A taxpayer prepared her return by herself, using the inexpensive Turbo Tax computer program, with a result of owing combined Federal, State and City taxes of $800. Then she called me, and scheduled a 1 hour tax consultation. After properly preparing the same years' return, with my knowledge, experience and skill, the result was a total refund of $1,800. For the single teacher, my (tax deductible) fee was $325. Her benefit was $2,600.
In 10 years in the future, the net benefit is almost $23,000. Would that have any value for you?
Real-life example #2:
A new client came to me. This couple prepared their prior year's tax return themselves, using inexpensive TurboTax software, resulting in a $660 combined Federal and State refund. I then prepared their tax return, utilizing my years of education, experience and knowledge. The result was a combined Federal and State refund of $6,200. This is an increase of $5,540, or 800%.
In 10 years in the future, after paying (tax deductible) tax preparation fees of $4,000, the net benefit is $51,400. Does that have any meaning to you?
I spoke to an IRS agent recently. I told her that I thought Turbo Tax software was a great deal for the government, because people have no idea of the many legal deductions available to them. They prepare a return quickly, with no education or skill, and send it in to the government. They pay much more tax than they are legally required to pay. I was surprised when she said, "Well, you know what I see? I see people who claimed many deductions they were not entitled to, and I have to go out and bust em'!" Which alternative would you choose?
I have also seen tax returns prepared using Turbo Tax software, which had the numbers in the wrong place, and inappropriate forms which I have never seen in 25 years of tax practice. It has been time-consuming and expensive to amend these returns. Frequently, taxpayers do not understand what they are doing with this software, cannot control it properly, or do not have the experience to recognize the output is wrong. Taxpayers usually do not understand the various acceptable options available to report the same transaction, and which is more advantageous for them. Of course, with a tax system as complex as this, there are various alternative strategies available to minimize taxes. With the ever-changing complexity of business taxes today, self-preparation using an inexpensive program could be a serious - and expensive - mistake.
What Happens if a Return is Audited by the IRS?
If it is necessary, I can successfully defend these tax returns before the IRS with no problem, because they were prepared correctly, in accordance with current tax law. If there are questions or problems, clients don't need to "Ask the Box" or represent themselves against an experienced IRS agent, a foolish, dangerous and expensive mistake. They can call an experienced Certified Public Accountant, not to go with them to an audit, but to go instead of them. Only an attorney or a CPA can represent a taxpayer, not unqualified "tax preparers." However, please be forewarned: I do not defend tax returns that I did not prepare. I simply do not have the time.
Now, you decide: Is Turbo Tax really such a good idea? Does it really save people money?
