Turbo Tax - Another Look

[Snaggletooth]

A new thread - so we can get right to the issue without complaints about all caps, multimillion dollar portfolio management firms who won't tell us who they are, and other small talk.

Fact of the matter - when going behind Turbo Tax returns, I find errors some 80% of the time. More often than not, the taxpayer has cheated himself -- on the average I would say between $700 and $1000, although I was able to reduce one lady's liability by some $4400 once. I think other tax preparers have experiences similar to mine.

However, we are not seeing the vast majority of Turbo Tax returns. The only ones we see are cases where the taxpayer doesn't have enough tax savvy to negotiate the interview, or other aberrations which Turbo Tax can't program around.

There are millions of Turbo Tax returns (practically ALL of their short forms) that we will never see, and the market for simple returns has been successfully invaded by Intuit. I'm not crazy about doing a $35 short-form, but if I did hundreds of them, this would probably be more profitable time-wise than the tougher returns that I do.

There are also millions of Turbo Tax users that could save money if they came to a preparer, but we will never see them either. These are "know-it-all" types. Engineers, attorneys, etc. who think Turbo Tax has made taxation simple. They have no idea how much money they are leaving on the table.

And being honest with each other, probably 70% of all returns are "short" forms, 1040As and 1040 EZs. We also know that for a short form, the tax refund/payment will be the same regardless of whether that return is filed by Turbo Tax, HRB, JH, or the finest CPA or EA money can buy.

I believe a realistic estimate of 25 million Turbo Tax returns, some 15 million of them have no opportunity for variance (short forms), another 5 million are people that we COULD help but won't have the opportunity because they think they know everything, and there are maybe another 5 million for people who cannot make relevant their electronic interview, are not computer-savvy, or can't deal with other complexities.

If my estimate above is reasonable, then when we post glowing results about rescuing Turbo-Tax users from the tar pit, saving them big money, and TurboTax creating new customers for us, we are only dealing with a small percentage of Turbo Tax users -- namely those whose situations are not adequate to deal with the software or too complex for them to deal properly with the interview.

When we give these testimonies we are focusing on those 5 million returns where the client should not have bought TurboTax to begin with. The REAL story is that we have lost the other 20 million returns to Intuit.

[Black Bart]

Turbo-Tax & the Abramoff syndrome

The REAL story is that we have lost the other 20 million returns to Intuit.

I think Lacerte's a great software, but, you're right; Intuit is like that disgraced political lobbyist, Jack Abramoff, who was being paid by one Indian tribe to help keep their casino open and simultaneously being paid by another tribe to close it down.

[LawrenceGR]

Turbo Tax

I read some of the post on the other thread and some I agree with and some not. I have clients that have brought me a mess for a DIY program and I like the business, it's fun sometimes to work out a puzzle for pay. I can see where some folks would rather spend $35 or $40 to buy the program and have the satisfaction of having done it themselves than coming to me for $50 or $80 and watching TV for 4 hours. There are projects that I have done where a pro could have done it half the time with much better results but I have the sense of accomplishment that "The facet does drip anymore". While I am not comparing taxes to home inprovements and repairs there are some people that want to try it, having said all that when the facet continues to drip I have to call a pro. The sum of which is: if they can do it their self more power to 'em if they make a mess more money to us. I think we as tax professional have to identify our competition, I know in my practice that there some people who could buy a program off the shelf and come up close to the same numbers. When I do these peoples returns I keep that in mind when I make out the bill.

[Matt Sova]

I know in my practice that there some people who could buy a program off the shelf and come up close to the same numbers. When I do these peoples returns I keep that in mind when I make out the bill.

I do to, as I bill them my normal rate. Sure they could buy the software and prepare their return themselves, but at what cost. There is the cost of the software, which is minimal. But they are spending a weekend or 2 messing with the stuff. They know that. That is why they are coming to me.

Matt

[LawrenceGR]

I agree

Matt Don't get wrong, I know many people just don't care to mess with it and for them I bill the normal fee. There are some cases where I only charge an E-File fee like if a child of one of my regulars and of course there is family. I am one of 12 children and most of my brothers sisters nieces and nephews come to me. This year I started charging them at least an E-File fee althought most of them pay me. As I said before some people just like the chalange(sp) of doing it themselfs time doesn't matter. I have had people call me with questions using TT or something and most of the time I help them if I can, there are times when I tell them they should just bring it to me. I am not afraid of competion I know some will try it on their own but there are still some who don't what to be bothered. I think if most pros take a look, they have more clients now than they had 2 years ago. We as tax pros offer more than just their taxes, they ask us about other financial matters as well. The DIY softwares are not going to go by the wayside neither are tax professionals.

[Unregistered]

I feel the problem is that we as tax prep pros often look at tax returns as a job that provides us income for only the 4 months of the filing year. If you take the time to broaden your horizons into investments, insurance, payroll check writing and bookkeeping, you will find that the $35.00 return that TT and other software programs are stealing as you say are not worth worrying about.

My partners and I have found that by offering our clients more than just tax prep they come to see us in a whole different light. We don't want the $35 return. I want the $350 return who wants life ins( another $100/month revenue) and starts two IRAs ( $100/month in revenue)

In my opinion those who are scared of TT or H&R or whom ever, are really worried that their old school ways off looking at tax prep have passed them by.

Basically to be successful you have to constantly re-invent your practice and give clients extra value. What we like to call this value -added help. Show the client that yes you can go use TT but will TT tell you that by putting XXX in XXX retirement plan you can save XXX.

Once computers hit the market we as tax prep people should have realized that the rules of the ballgame have changed. So we can either sit and moan about it or change with it.

[veritas]

Unregistered you really need a new handle. Unregistered is so cold.

[Unregistered]

what do you mean by "new handle"?

[veritas]

moniker, pseudonym

[Black Bart]

Do you want fries with that?

If you take the time to broaden your horizons into investments, insurance, the $35 returns...are not worth worrying about...offering clients more than just tax prep they come to see us in a whole different light...want the $350 return who wants life ins and starts IRAs...those who are scared of TT or H&R are worried that old school ways have passed them by...to be successful you have to give clients...What we call value-added help...Once computers hit the market..the rules have changed...we can either moan..or change

Dear Unregistered,

Please excuse my paraphrasing your message, but I think those are the highlights. Don't misunderstand me--you have some good points. Primary is that a businessperson (once I would've said businessman) must "keep up with the times" or outside factors will force you to adapt. I'm one of those "old-schoolers" and I don't like change--you won't either as you grow older, but that's beside the point.

I've "transitioned" through mechanical and electronic calculators, hand-written returns to tax-prep computers (saw that "ballgame change" looming in 1987), large floppies, small floppies, CDs, and Net downloading. It's all easier, but I don't like it--much is now beyond my control. People are comfortable with the status quo until pushed aside by fresh-faced, energetic youngsters with new ideas and attitudes. I guess that's the way it's supposed to be and one day it'll happen to you (yes, even you)--a yet-unborn twenty-year old will shock you by sneering at your "antiquated" methods.

My point here isn't to shun change; it's that there's an alternative to your business model. I want to be good at my job (tax preparation) and to give good advice when asked. I do that by specializing in tax prep. Lots of companies have gone by the wayside getting into myriad "side" projects; ignoring or "watering-down" the original wonderful product or service that made them so successful in the first place (think Thomson's QF and its ex-crew) . As one wag put it--"He learned less and less about more and more until he knew nothing about everything."

You want to make more money and feel that selling IRAs/stocks/insurance is the "going thing." No problem-that's your honest feeling. I want to make money too, but I'd rather not, so I'm not "going with it." Many firms are pushing those things, but I feel they're asking us to exploit our customers' trust by selling them things they may not need or want ("strip-mining" our client base, so to speak). Most are out-of-state--maybe they're good--maybe not. When my client retires I may be dead, but I know the Bank of "Dogpatch" (established 1901) or a branch of State Farm will still be here to pay that IRA. Ever tried to collect anything from an unsympathetic clerk in New York City?

Scared of TT or J-H "gifts"? No. If a client asks what I'm offering, the answer is: a good and correct, well-prepared $35 tax return. If they have problems, I'll fix it--no charge. Put another way, I feel I could justify imposing my name on a roadside billboard I once saw to read like this: "Bart's Taxes: Good as any; better'n some!" I like and want to do taxes--I don't want to be a salesman. By now you're thinking "just another old-timer to be dragged kicking and screaming into the 21st century." True, I don't like change and you embrace it, but all my life I've heard rah-rah, go-go, "motivational speaker-type" people extol the virtues of the lastest fad. Some are variously good/dumb/naive/oily hustlers. Many products, policies, procedures, gimmicks, etc. are frequently "disguised" by a euphemism. Some currently in vogue and their true meanings are:

"Would you like to try a value meal?" -- Never mind what you want to eat--these items are very profitable for us.
"We're downsizing." --- You're fired.
"We're restructuring." --- You're fired.
"We're sunsetting that program." -- It didn't pay off-we're dropping it-purchasers are stuck.
"Let's try multi-tasking." -- We're taking the work of two people and giving it to one.
"I want to share this with you." -- I want to sell you something.
"We're optimizing employee contributions." --- They'll have to work much harder.
"You're expected to be pro-active on this." --- Get pushy.
"The company's partnering with you." --- They get the money--you get a "title."
"A multi-faceted approach." -- Trying every dodge humanly possible to turn a buck.

The classic "would you like fries with that?" is similar to your "value-added help." I submit that the "value" is "added" to your bottom line and it's irrelevant as to whether or not it "helps" theirs. Basically, someone's favored you with their tax business, but it just isn't enough. A hot-shot enterprise can't get by on a lousy $35--it needs more. I concede some people could use IRAs and maybe stocks pay off better than CDs, but that's not really the goal of these things--the goal is to extract large fees from them. If it makes money for them; fine. If it doesn't, that's fine too. A broker once told me about his big commission sale of a stock which subsequently plunged--the client lost his shirt. As he only half-jokingly quipped, "Well; I made money and the house made money. Two outta three ain't bad."

[geekgirldany]

Bart I agree with you. I've had many customers come to me from mostly CPAs and tell me stories of how they more often tried to talk them into investments than talking about their tax returns. The customers grew frustrated and eventually left. I think we are all in business for a profit. I too want the turbo tax crowd. I charge around $40 for a 1040ez and not much more for a 1040, Sche A, etc. I had one customer tell me that he could do it on turbo tax but for what he paid for the software he could pay me. So I take it.

Turbo Tax doesn't just cost $35 bucks. Its more like $40 to $99 depending on the flavor you want. I noticed they have business version now that even does S-corps, partnerships, etc. Wow talk about error heaven.

I guess I learned on the old ways. I still keep track of customers payroll on paper and then do it on the computer too

[rosieea]

The classic "would you like fries with that?" is similar to your "value-added help." I submit that the "value" is "added" to your bottom line and it's irrelevant as to whether or not it "helps" theirs. Basically, someone's favored you with their tax business, but it just isn't enough. A hot-shot enterprise can't get by on a lousy $35--it needs more. I concede some people could use IRAs and maybe stocks pay off better than CDs, but that's not really the goal of these things--the goal is to extract large fees from them. If it makes money for them; fine. If it doesn't, that's fine too. A broker once told me about his big commission sale of a stock which subsequently plunged--the client lost his shirt. As he only half-jokingly quipped, "Well; I made money and the house made money. Two outta three ain't bad."

Well stated. For my practice, I simply let my personal "smell test" be my guide. Thus, I won't do RALs, discount gimmicks, financial products, or help Quickbooks sell its product (nor do I use it). I do write-up, because I think it goes hand-in-glove with tax work. In fact, I usually decline to do a return for an entity for which I haven't done the books. If a practitioner can offer financial and bank products with a clear conscience and avoid conflict of interest issues, more power to him or her. I'm nearly 65 years old and am not about to begin now. And I'd like to think that I never would have done those things, because they don't pass my smell test.

[oceanlovin'ea]

Lose sleep

I don't think I could sleep at night if I gave my client's bad investment advice. I just prefer not to go into that area. If they have questions on investments, I will answer as best I can and suggest they see a reputable broker. (Not Merrill Lynch) And I tell them that before they make withdrawals from IRA's or retirement accounts, they should see what the tax consequences will be (talk to me).

I don't offer RAL's. Most of my clients are extremely happy with direct deposit's quick return. Since my office is in my home, I really don't want some of the RAL crowd coming here.

I would like to get into more bookkeeping during the year and will probably pursue that this summer. I need to find a good write up program first.

I get emals from Jim Berry all the time. He has bookkeeping.com. Has anyone used this website for bookkeeping business?

Linda F

[OldJack]

I don't think I could sleep at night if I gave my client's bad investment advice. I just prefer not to go into that area. If they have questions on investments, I will answer as best I can and suggest they see a reputable broker.

At one time I thought about getting the status of Certified Financial Planner but decided that as a CPA I prefer to do what I was trained to do and that did not include giving advise to clients on investments. I have never been that good at investing myself so why should I advise others on how to lose their money. I use an investment pro for my own investments and for a CPA there is the issue of independence with commissions.

I use off the shelf Turbo Tax for one tax return because I have 1 out of state client that likes to enter their data and then email me the file to finish. I charge them $450 which includes the fact that I purchased the program just for them plus what I would charge them anyway. Like Quickbooks, Turbo Tax program insists on doing things its way and makes it slow and difficult for a pro to enter data. Turbo Tax makes it time consuming to even simply open the tax return and look at things.

[Unregistered]

Black bart , First I understand your want not to change it is a common problem for most accountants, by definition we are all control freaks, myself included. However I resent the fact that you or anyone else sees my tax prep advice coupled with sound investment and insurance advice as just another ploy to make money.

I have provided my clients with many great ideas for saving money often times without collecting a dime. I have spent 3 hours setting up a college savings plan to have a client fund it with 50 bucks a month and i get .37cents.per month. Look my partners and I got into this business for a couple of reasons. We started in 1976 just offering tax advice and then added bookkeeping and payroll services. We did that and only that until 1997. in 1997 we ssaw that alot of our clients we infact being taken advantage of by "salesman". Then when they did something with the IRA the Salesman would say go talk to a tax pro. Well why not cut out the middle man.

Sure our we compensated, hell yes. But we spend alot of time doing things for clients that don't earn me a buck. i think since I have started in this business I have never even charged a dime to write a letter to the IRS or some other government agency.\

basically what I was trying to get at with my prior post was that you can no longer just do taxes and make a good living. Clients are busy people who don't have time to waste going to see 5 different professionals . They want to go see one and get everything handled with someone they trust.

I will and can do that for them excluding legal items , that i leave to lawyers.
Look to each his own , I was just tried of hearing tax pros complaining about TT and other competitors.