“Pay half” tax preparation offer draws public discussion

H&R Block has caused commotion within the tax preparation industry last week with its “pay half” offer for new clients. Likewise, Intuit has annoyed some with its TurboTax advertisements suggesting that tax preparation is a simple do-it-yourself project.  The TurboTax “It doesn’t take a genius” ad campaign belies the decades of training that tax professionals accrue and the fact that Intuit acknowledges that many TurboTax users switch to professional preparers later on when they find trouble anyway.  It is ironic that the company now best-known for promoting self prepared tax returns is also the nation’s leading firm in referring its customers to professional accountants (not just for taxes but for other accounting issues as well). One accounting group had comic T-shorts printed that said “We fix TurboTax returns”. Clearly not everyone feels offended by the expansion of self filed tax returns.

I’m not bothered by either firm’s advertising promotion. I remind other tax practitioners that the new customers who would use H&R Block or TurboTax based on the TV advertisements are not candidates for a tax professional and people who use me (or any other tax professional) would not reasonably consider using H&R Block or TurboTax as an alternative. These are completely separate market segments and the only overlap is with consumers who have not yet learned which segment they best fit. These large firms tend to suffer in client satisfaction reviews and that’s where small professional practices shine. Compare H&R Block’s 1.5 star consumer satisfaction rating at Consumeraffairs to the ratings of individual accountants’ rating on the Intuit ProAdvisor site. (I’d offer my own 5 star rating for comparison except for the embarrassing fact that only one rating has actually been recorded so far. Intuit and I are working on that technical issue to learn why some ratings are not being recorded).

I wonder if strategy will pay off for H&R Block. The firm’s internal cost of preparing a first year return is significantly higher than for a repeat client. These price-shopping new clients are not likely to be loyal when regular rates are offered next year. I presume that H&R Block knows what they are doing; we know that the bigger firms are more interested in the long-term value of data mining private financial information than the immediate revenue from preparing one tax return.

Earlier this year I caused a little fuss in my online communities (nothing compared to the big national ad campaigns mentioned) by simply suggesting that my rates would be indexed to published average prices. I simply don’t want to be the cheapest and don’t want to be the most expensive. I’m pleased to offer rates for personal professional service at a rate that is the average of what you’s pay anywhere. Indexing prices is the easiest way to accomplish this goal.