HRB "Peace of Mind" guaranty

[FEDUKE404]

Product description error

I would be very careful about using the word "insurance". This product is a guarantee.

You do not want to represent this or any service as "insurance" since that industry and their products are regulated by every state in the U.S. HR Block had an issue in Wisconsin when a franchise office referred to the "Peace of Mind" product as insurance and they were not registered to provide insurance products in Wisconsin.

That's actually why I put that word in quotation marks. The same concept applies to those wonderful IRA products that Block offered in past years......could only be a savings account or something similar.....since "investments" that are normally included in many/most IRA's cannot ever be offered by a store-front button pusher.

I've seen several clients from recent years past who got a "Refund IRA" or whatever the company called it, usually in the amount of $300-$500, and the fund got more negative in net value with each passing year, due to low return and annual costs. (There was also a separate fee to add new money, and another fee to close the account.) But the salesperson certainly got his/her bonus for successfully pushing the product, and in many cases that person was deemed by management to be a better "preparer" than the person with loads of tax knowledge and experience who was not quite so successful. The POM frequently ran into similar choices for the tax client: A - "You've been doing my taxes for years, why do I need even this? versus B - "Good grief, this preparer is clueless....can I maybe get two of them?!?" And then there were some preparers who "automatically" added the Pom/GG to the return. Fortunately, many of those folks now have found new employment.

It's for that reason that I now focus on tax work only. There is certainly a consumer market for computer interviews, PoMs/GGs, RAL loans, paystub loans, bright colored credit cards, etc.....but it just no longer involves me.

My apologies for possibly getting a bit off course here. It just bugs me a lot to see what many folks now routinely see as being part of "tax preparation."

FE

[Zee]

I haven't work for Block for a couple of years now but when I did I processed a lot of Peace of Mind claims. If there was any doubt about fault we always errored in the clients favor. Also the payment was "grossed up" so the client received the $5,000 after taxes were paid.

I'm wondering...what percentage of claims were paid? I wish I could offer the same guaranty for $40.

[gkaiseril]

You may need a another License

[QUOTE=FEDUKE404;47990]For the $40 or so cost, the "insurance" may not be a bad idea especially with some of the folks doing tax returns these days./QUOTE]

I would be very careful about using the word "insurance". This product is a guarantee.

You do not want to represent this or any service as "insurance" since that industry and their products are regulated by every state in the U.S. HR Block had an issue in Wisconsin when a franchise office referred to the "Peace of Mind" product as insurance and they were not registered to provide insurance products in Wisconsin.

[iratax]

Ex blockhead

I haven't work for Block for a couple of years now but when I did I processed a lot of Peace of Mind claims. If there was any doubt about fault we always errored in the clients favor. Also the payment was "grossed up" so the client received the $5,000 after taxes were paid.

[erchess]

Yes

[QUOTE=Zee So, you add this cost to the client's bill without asking?

Technically I build it in to the fee by charging more than I otherwise would for the base form and for Schedules A, D, C, E, and F. I don't bill them separately for this or for the paper I use, the wear and tear on my computer and printer, my software, my E and O policy, or any of my other costs of being in business. Make no mistake however, about the fact that my clients are paying all these costs because if my costs were less I would lower my fees.

[Gary]

Peace of Mind

Block's "Peace of Mind" costs $30 this year. It does pay up to $5000 in additional taxes if it is a result of an error by the tax preparer. It is true that the client will get a 1099-misc for the amount of the payment, which is only fair since this is truly income to the taxpayer.

Gary

[FEDUKE404]

Tax "insurance" considerations

Although I can't specifically say what Block does or does not currently have, I do have some experience with similar programs in the past. (Block has their "Peace of Mind," J-H has a "Gold Guarantee," and I'm sure there are others.)

For the $40 or so cost, the "insurance" may not be a bad idea especially with some of the folks doing tax returns these days. Many Block offices have included the Peace of Mind program for "free" at their premium offices, but of course everything there was already charged about double in the first place!

The biggest problem is that the fine print usually requires that the error occurred with full knowledge of all relevant facts. "You do have written records, don't you?" or someone "forgot" they had already claimed the Hope Credit in the prior two tax years. There is a certain amount of management discretion for claims for the "close" calls, which frequently go in favor of the customer. A preparer who entered $5,555 in property taxes instead of $1,555 from the mortgage company document would be a good candidate for the PoM!!

One thing many folks do not know: If Block ends up paying $1k of "extra" taxes for you (along with the relevant interest and/or penalty), expect to find a Form 1099-MISC for that $1k awaiting you next year!

The program is a money-maker for the store-front firms, but for sole practitioners it might be a potential minefield. I have found that most "reasonable" folks are content to allow me to adjust fees and/or pay the interest/penalties for what is my own error, with them paying the taxes. Most take the approach "I would have paid it anyway."

I hope this helps.

FE

[Zee]

can offer a product called Safetynet. On a protected return they pay penalty, interest, and additional tax up to some cap if there was preparer error. If they feel that the client misled the preparer they won't pay. The cost last year varied from about $39 to $79 depending on the return. I do not ask my clients if they want it. It is included in my fee and the client's itemized bill does not mention this item any more than it mentions that I print certain things in order for them to have copies.

I also have a pay per return version of CCH Ultratax which I use for very complicated returns that Orrtaxvbhhhhhhhhffddd does not handle to my satisfaction. I don't have Safetynet or anything similar to offer those clients.

So, you add this cost to the client's bill without asking?

[erchess]

The Various Vendors of Orrtax software

can offer a product called Safetynet. On a protected return they pay penalty, interest, and additional tax up to some cap if there was preparer error. If they feel that the client misled the preparer they won't pay. The cost last year varied from about $39 to $79 depending on the return. I do not ask my clients if they want it. It is included in my fee and the client's itemized bill does not mention this item any more than it mentions that I print certain things in order for them to have copies.

I also have a pay per return version of CCH Ultratax which I use for very complicated returns that Orrtax does not handle to my satisfaction. I don't have Safetynet or anything similar to offer those clients.

[Zee]

Is this HRB guaranty still $39? Sure, I know the chances of audit are very small. But, $39 isn't really too bad if HRB will actually live up to their terms and pay all additional taxes, interest, and penalties resulting from their error. I just read a string where HRB erred in deducting education expense on a client's return resulting in $3100 taxes plus interest and penalties. They paid the interest and penalties under their basic guaranty, but not the taxes. Apparently, the client was told the taxes also would have been paid if the "peace of mind" guaranty had been purchased.

I always pay interest and penalties on preparer errors, like most others. I hasn't happened often. But, I sure wouldn't pay the taxes. The client already had the use of the money at no cost. It just wouldn't be practical to offer this type of guaranty for a small or medium sized-practice. Of course, when you do millions of returns it's probably very profitable.

What do you guys do? And, how do you respond to client's seeking a similar guarantee if asked? I've never been asked.