TaxesValues

Tax preparation fees represent the “wild west” of the financial services industry

We are just three weeks away from the opening of a new tax filing season and so the subject of disclosure of tax preparation fees comes up again. My opinions differ sharply from the mainstream of the tax preparation industry.

The tax preparation industry may be the last bastion of “let the buyer beware” free market economy left in the financial services industry. That fact has not escaped government officials and legislators who are increasingly likely to discuss increased regulation of the industry. Two years ago David Rothstein wrote for Policy Matters Ohio “This brief finds that tax preparation by commercial paid preparers, despite being important to households, suffers from a lack of transparency and disclosure in the fees charged.” Much has already happened along this regulatory front but this post is not meant to cover that news topic. Instead, I simply focus on the contrast of opinions on this topic within the tax preparation industry.

In response to an online discussion of whether tax preparers should disclose their fee in advance in writing, one industry leader wrote flatly “Don’t state the fees”. That opinion seems to be shared by the majority in the professional service group.

My socialist-leaning response was exactly the opposite, I wrote: “I would argue that since tax preparation service is more mundane and commonplace than selling carpets that gives rise to a public interest argument that fees are justifiably subject to increased disclosure and standardization. When you listen to financial industry regulators make comments about the “wild” tax preparation industry, I think we should take this as a clue as to what’s to come. No matter whether you are repairing cars, making loans or handling almost any other type of transaction, our societal trends call for increased public disclosure, In my industry, for example, I am required to file with the government and publicly disclose fees for providing financial advice but not required to file and publish fees for tax preparation, When providing an accounting service I am required to (or at least strongly urged to do so with risk of peril) to put the fee in writing in advance of the engagement. So it’s a bit odd from the financial advisory client’s perspective that tax prep fee might be the only unregulated and undisclosed fee that they encounter.” 

My own tax preparation fees are based on published data representing industry averages. I publish my tax preparation rates on my web site so that anyone considering using me or wishing to compare prices and services can do so with minimal effort. I reach a written agreement in advance with each individual client. Since I work remotely through technology-driven platorms, I naturally follow the full disclosure principles that consumers tend to expect when doing business online. I simply take it farther in believing that this is the right way to do any type of consumer business. This is a core business value for me, not a trivial issue or an optional business decision. I also recognize (and accept) that sticking to my belief of standardized fee-setting and public disclosure is one of the reasons why my tax preparation income is lower than most professional tax preparers. So be it; there comes a time in the maturity of any consumer service industry where we should realize that collective social interest trumps individual business freedoms regarding mass pricing policy.

Simply put, I would like to see tax preparers: a) publish their fees in some format that lends to comparability and, b) would prefer to have the industry use written client agreements that state the fees as clearly as possible in advance of providing service.

Leave a Reply

Your email address will not be published. Required fields are marked *