Billion Dollar Scam: Why you should play the lottery instead of going to H&R Block

H&R Block is running an aggressive campaign under the rubric “Get Your Billion Back” trying to convince taxpayers to come and have their taxes done by one of their “Tax Professionals”. Their pitch is that “this is how much money is left on the table when people do their own taxes”.

1 Billion Dollars

On their site and in TV ads they provide all sorts of information meant to wow you about how much $1 billion dollar is.

It’s $500 on every seat in every profession football stadium in America!!!

It’s 869,565,217 Bags of Chips!!!

It’s a stack of money that reaches the Van Allen Belts.

It sure sounds like a lot of money. But you know what it really is? It’s bullshit.

The $1 billion they are referring to is “left on the table” by the 56,000,000 Americans who do their own tax returns. The math is simple. That’s an average of less than $20 back per return. Since it costs an average of $198 to have H&R Block do your taxes [1], that is a completely miserable return – a pay out of roughly nine cents for every dollar spent. Or put another way, if everybody who did their own taxes went to H&R Block to have their taxes done, they would spend over $11 billion dollars. That’s 9,641,739,130 bags of chips!!

This is just an insane financial proposition. I don’t know what fraction of people get more than $198 back, but it has to be pretty small. H&R Block say that 1 in 5 people get more money back than they would have if they’d done their taxes themselves. So these people average around $100 back. Even if you’re one of these “lucky” people, you still net negative on average. Plus the upside has to be pretty small – and is capped on the high end by the amount you actually paid in taxes.

Now let’s compare that to everybody’s favorite “bad deal” – the lottery. A typical lottery in the US pays back around 60 cents for every dollar collected (this number varies depending on where you play and which game you play – some states are as low of 50 cents on the dollar, some as high as 70 [2]). But as bad a deal as this is, you are still doing six times better than if you go to H&R Block! Plus, there’s actually the prospect – albeit a small one – of a really big payoff.

If all of those 56,000,000 tax filers used their $198  – or let’s make it $150 so they can buy tax prep software to do it at home – and bought Powerball tickets throughout the year (there are around 100 draws so they’d buy 1 or 2 tickets per draw), that would be around 4.2 billion tickets. With odds of hitting the big jackpot at around 1 in 175 million, that means that 24 of these people would win in jackpot every year – at an average of around $140 million per jackpot (at this point they would actually need to see a tax professional). And another 800 people would win $1,000,000 prizes.

None of this makes playing the lottery a good investment  of course – but it’s a hell of a lot better than falling for H&R Blocks scam that is cynically trying to take advantage of most American’s innumeracy to take billions of dollars off your table.

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30 Comments

  1. oz
    Posted January 16, 2014 at 11:54 pm | Permalink

    You’re right about the money and the scam publicity tactics, but do not mention time.
    I pay a professional about 450$ (so more than twice 198$) to do my taxes, mainly
    to save me the time&hassle of doing it myself (he also might get me more returns than
    I could myself, but have no idea if so and how much). Paying 198$ for saving me the time to do taxes sounds like a great deal to me.

    • Posted January 16, 2014 at 11:58 pm | Permalink

      Yes. I’m sure that’s why most people use professional tax preparers. But that’s not H&R Block’s pitch – they’re pitching all the money you’re leaving sitting on the table.

    • Posted January 16, 2014 at 11:58 pm | Permalink

      And I assume you still have to gather docs, etc… So it’s not like you’re spending NO time on it.

      • Steve Koch
        Posted January 17, 2014 at 6:09 am | Permalink

        The H&R Block campaign is silly, of course. But “oz” is right too. It’s worth it for an individual to pay $30 or more for Turbo Tax at least. So maybe accounting for that, it’s on par with the lottery at least. Maybe put the $150 on roulette!

        It’s all part of a larger scam with complicit tax accountants and lawyers. If one wanted to complete their own tax return by hand, and do it correctly, there’s a tremendous amount of time required. For example, here’s the IRS publication on travel expenses: irs publication 463 (only 50 pages). That’s just for personal income taxes. I remember over 10 years ago Treasury Secretary Paul O’Neill calling the tax code an inscrutable abomination and estimating that over $1 trillion of effort is wasted annually on corporate and personal income tax issues (probably mostly corporate). All too believable. So many people make so much money due to the complexity, it’s tough to imagine the tax code ever being overhauled.

        • Posted June 15, 2014 at 3:57 am | Permalink

          I agree that the add ran this past year by HR Block did not apply to many tax payers. However, every tax payer who responded to the ad, who had already prepared and submitted their returns, received much more than the cost of the tax return in additional refunds, or reduced tax debt. The largest was 25,000 and the smallest was 300 dollars for each of the past three years. The cost of a second look and amended return for 2010, and 2011 was 99 dollars. The cost of a 2012 amended return was 125.00. More to the point of the post I am responding to, I took a phone call from someone doing turbo tax at home. In the background I could hear his spouse yelling at him. they had been working on their return for more than 3 hours and were arguing and bickering…… I remember thinking to myself. Why not put us in the tool box…drop off the return and go about your business. We call you when its ready. Isn’t that worth something? Your return comes with a guarantee, and personal followup with your preparer if you get any letters. You get to see someone personally. The argument is, that with self-prepared returns done at home with tax software, opens the door for abuse….the people at home tend to take tax benefits they are not entitled to, do not understand tax law so make errors on the return, and overlook benefits for themselves. its mixed bag. I agree our tax system is way to co-mplicated. When I worked at the U.S.Treasury Tax Advocacy Panel (a pro-bono gig that paid per-diem only at government expense) I found out there is active research in developing a system where the tax return is done on a post card. I live for that day. In the meantime, why not let the professionals who know the law, do your return while you shop, recreate and work. Drop it off and come back later.

          Disclaimer: I am required by law to inform all readers of my blogs that I am a registered tax return preparer employed by HR Block.

    • Robert
      Posted January 21, 2014 at 7:04 am | Permalink

      I went to block once in my life. The guy doing my taxes knew less than I did. Seriously. He was just using a program just like Turbo Tax. I did them myself first but was nervous I did something wrong. I didn’t. The result was almost exactly the same. People will go because they are lazy. I get that. I am lazy too, but I won’t go back there or to any place like it.

      • Blabblahblah
        Posted February 6, 2014 at 10:16 am | Permalink

        Yes, if your taxes are simple, then by all means go for a free 1040-EZ. However if you have a house, stock investments, tuition reimbursement and half a dozen 1098s, paying 150-200 for a tax advisor plus the guarantee that comes with the payment is money well spent.

  2. Oobalong
    Posted January 17, 2014 at 4:55 am | Permalink

    Mike, The real issue with H&R and Hewlett Jackson has nothing to do with their mildly inane advertising, the real issue is the interest they charge on loans which are exist in regulatory netherworld and get away with interest rates in excess of 600%. See their own 10k filling for their own description of these services:

    OTHER OFFERINGS – In addition to our tax services, we also offer clients a number of additional services,
    including refund anticipation checks that include a fee deduction feature (RACs), H&R Block Emerald Advance® lines
    of credit (EAs), prepaid debit cards, our Peace of Mind® (POM) guarantee, credit cards, and, for our Canadian clients,
    a refund discount (CashBack) program.
    Refund Anticipation Checks. RACs allow clients to receive their tax refunds by their chosen method of
    disbursement and include a feature allowing clients to deduct tax preparation and service fees from their tax refunds.
    Clients may choose to receive their RAC proceeds by direct deposit to a deposit account, by deposit to their H&R Block
    Prepaid Emerald MasterCard® or by receiving a check. RACs are available to U.S. clients and are frequently obtained
    by those who (1) do not have bank accounts into which the IRS can direct deposit their refunds; (2) like the convenience
    of a temporary account for receipt of their refund; or (3) prefer to have their tax preparation fees paid directly out of
    their refunds.
    H&R Block Emerald Advance® Lines of Credit. EAs are offered to clients in our offices typically from late
    November through mid-January, currently in an amount not to exceed $1,000. If the borrower meets certain criteria as
    agreed in the loan terms, the line of credit can be utilized year-round. Borrowers may choose to pay down balances on
    EAs with their tax refunds.
    H&R Block Prepaid Emerald Mastercard®. The H&R Block Prepaid Emerald MasterCard® allows clients to
    receive their tax refunds from the IRS directly on a prepaid debit card, or to direct RAC proceeds to the card to avoid
    check-cashing fees. The card can be used for everyday purchases, bill payments and ATM withdrawals anywhere
    MasterCard® is accepted. Additional funds can be added to the card account year-round through direct deposit or at
    participating retail locations.

  3. Posted January 17, 2014 at 5:48 am | Permalink

    After a quick and dirty search, the IRS states that in 2009 (yes, I know, old data but at least it’s something to start with), in 2009, there was over $200 billion in refunds given to some 131 million taxpayers. The $1 billion they claim is left behind is roughly 0.3% of the total refund given. Add to that the math of $1 billion split between all the taxpayers in the US is $7 ($8 if you round up). That also converts to $3 per US resident. Not a large amount of money. So yeah, I’d call bullshit on it.

  4. Posted January 19, 2014 at 7:39 pm | Permalink

    I’d agree that all tax-preparers are bullshit, but that’s only because they shouldn’t exist. The government *knows* how much I owe it. Just *tell* me. Don’t make me run around in circles either wasting hours filling out forms or paying Turbotax, or the more expensive in-person things like H&R Block.

    • Ann
      Posted January 31, 2014 at 6:47 am | Permalink

      If the government told you how much you owe them without taking into account their possible credits and deductions most people in the world would be paying way too much. Trust me I have a simple return. I get refunds almost every year. I would be over paying the government if I trusted their numbers.

  5. mytchondria
    Posted January 22, 2014 at 1:07 pm | Permalink

    Do you have a suggestion on good lottery numbers to play?

    • Posted January 22, 2014 at 2:15 pm | Permalink

      I always play the winning numbers from previous week since I figure nobody else does and I would be super famous if I won with them.

      • Brian
        Posted January 23, 2014 at 6:50 am | Permalink

        Ha. I don’t play unless (and not often when) it’s mathematically profitable assuming a single winner, and when I do play, I try to pick numbers less likely to split with another nonrandom selection. Usually for me that means no numbers less than 31 (since those appear in dates) and probably a string of consecutive numbers to play on what other people think is “unlikeliest”.

      • Brian
        Posted January 23, 2014 at 6:51 am | Permalink

        Ha. I don’t play unless (and not often when) it’s mathematically profitable assuming a single winner, and when I do play, I try to pick numbers less likely to split with another nonrandom selection. Usually for me that means no numbers less than 31 (since those appear in dates) and probably a string of consecutive numbers to play on what other people think is “unlikeliest”. I like your way too.

  6. Steve EK
    Posted January 22, 2014 at 4:39 pm | Permalink

    I had a hard time believing H&R Block’s claim in the TV commercials, so I sought out info on the internet. Thanks for writing this. It confirms my suspicions about the claims. I will continue to us software to do my taxes. Has worked great for years.

  7. Bonnie De
    Posted January 27, 2014 at 1:24 pm | Permalink

    Hmmm…. I thought that commercial was not on the up and up. The way I think is that people who do their own taxes (the ones that have deductions and claim them, not the ones who have no deductions) most likely take deductions for things they are NOT supposed to take rather than forget some they should take! I wonder if that percentage was calculated!!! How many people took unqualified or exaggerated amounts of deductions! HA

  8. MRS
    Posted January 28, 2014 at 1:10 pm | Permalink

    HR Block isn’t marketing to professionals people. They’re marketing to working poor. The people who feel too intimidated to so their own but have REALLY simple returns (eg standard deduction, no property, etc). Those are the people who are likely to pay them to file and pay those ridiculous “rapid refund” fees. Not to mention they are usuLly the farthest thing from a “tax professional”.

    • Steve Lot
      Posted February 6, 2014 at 10:56 am | Permalink

      Just so you are aware, the “rapid refund” is no longer even a service that H&R Block offers.

      Secondly, all of H&R’s “tax professionals” are exactly that. Every single person that works on a return is required to complete a tax course every year. They must pass the exam, and throughout the year give up their own time to keep themselves up-to-date with all the newly implemented or changed tax laws. NOT EVERYONE can become one, EVERYONE that is has a current certification.

      A lot of Block offices I know of even have CPA’s working in them. Perhaps they deserve a little more credit than you are giving them.

      • Posted February 6, 2014 at 2:13 pm | Permalink

        I’m sure they are smart and good people. That’s not the point. The point is that according to H&R Block’s own numbers – $1 billion left on the table for 54 million returns – it is not worth spending money on. Sure, there are some people who will benefit. But, on average, it’s not a good deal.

      • Christy
        Posted February 25, 2014 at 10:54 am | Permalink

        A tax course every year?? Well, I spent years on my degree, and much more on continuing education…. I DO NOT agree with the term “tax professional” being thrown around so loosely! It was only recently that legislation changed requiring credentials to touch a tax return. Before, H&R gave a 9 week tax course – and that is in no way good enough to call yourself a tax professional! I have corrected more returns and witnessed more fraud coming from these type offices. My advice – pick your tax professional like you would pick your doctor: ask for their education background and experience, and look up the AICPA average pricing for your return before you pay their unbelievable prices!

  9. Leo Knight
    Posted February 3, 2014 at 12:43 pm | Permalink

    My girlfriend used to get her taxes done by a woman with an office in a shopping center. For three years I would drive her up there to pay to have her taxes done. Then one year, the office was locked up tight, with a sign reading, “Closed Until Further Notice”. Later, it turned out the tax preparer was fleeing the law for all kinds of shenanigans.

    My girlfriend panicked. “How will I get my taxes done?” I asked my girlfriend if she had anything complex, like capital gains, etc. No, only her pay from work. I went to the library, got the EZ form and booklet, and did them for her. It took me about half an hour, but I spent another half hour explaining what I did, so that she understood it. That’s how I handled it until a few years ago, when my employer’s sister opened a tax office. She does mine and my girlfriend’s for free, and it’s electronically filed. Sweet deal.

  10. Osi
    Posted February 4, 2014 at 2:20 pm | Permalink

    We used to do our taxes with H&R Block (about 8+ years ago). It costs us $300 for the preparation, and a $1,000 penalty per kid. You read that right. H&R Block REFUSES to factor in the child credit. I found that out when I experimented one year by doing my tax returns in TurboTax (but not submit), and have it done by H&R, but not submit. In the end of that year, I switched completely to Turbo Tax.

    Sure, that year I had to pay $300 to H&R, but my returns were worth it.

    Just say no to H&R Block (Juneau, AK branch).

  11. Michael Ssss
    Posted February 4, 2014 at 7:53 pm | Permalink

    I assume that 90% who do their taxes at home using software do it correctly and the other 10% miss $200.

  12. Steve Lot
    Posted February 6, 2014 at 10:47 am | Permalink

    Here’s a simple task for all you Block Bashers.

    If you filed on your own, or through a computer software, or even with a CPA or different tax company, BRING YOUR LAST 3 YEARS RETURNS IN.

    It does not cost $198, it will not break your bank at all. If you have additional monies that were left behind in the last 3 years, H&R will amend them and generally it’s $99 for an amendment.

    Look at it this way….. those taxes are done and over with. They are filed, you received your return, your hands are washed… its done. But if you could get even $200 that was missed, wouldn’t you pay 100 to get 200?? IT’S FREE MONEY!

    H&R Block is simply trying to make sure every taxpayer is getting their money back. It’s YOUR money, GET IT BACK, AMERICA! 😉

    • Amber
      Posted February 25, 2014 at 11:06 am | Permalink

      Two things wrong with this statement 1. Its not free money, its the clients money. 2. $99 for amendments?!? I have never charged anyone that much in my company, that’s crazy! But nice try with your post.

  13. Neo
    Posted April 7, 2014 at 6:22 pm | Permalink

    Michael,

    You are not very good with math.

    1) Not all taxpayers let money on the table.

    2) H&R claims they will check your taxes for FREE and only if you can get more refund I assume they will pitch the amendment.
    Where you ever able to get a lottery ticket for FREE and see if it was the winner and if not just walk out the door, no harm done. Yeah right, NO, I thought so.

    I still don’t like H&R because their service is dreadful, but income tax prepares are not all to blame.
    You pay if you need the service or
    How about the oil change scam or the barber scam or the gardener scam ?? you can do all those yourself and save money , right?
    SO, no , your witty comparisons do not apply and are wrong.

  14. Jake
    Posted April 17, 2014 at 9:57 pm | Permalink

    I use to work for Block. 90% of the people who do the free 2nd look had no error on their return at all. Most of the ones that did have a mistake, they either owed or were getting back less than or not much more than $99. And unless clients have just an EZ return, fees start around $200, but are usually $250-$400. My thought every time I hear the Get Your Billion back catchphrase, I always think how with Block’s exorbitant prices, taxpayers would actually lose 3 billion to Block trying to get that billion. Not very smart. And unless you are getting a lie$10K refund and putting it on an Emerald Card, Block could care less about having you as a client, anyways.

  15. RC
    Posted May 14, 2014 at 4:24 pm | Permalink

    Try this. Routinely, HB Block charges millions of tax filers who have no children $15.00 to use a form the IRS DOES NOT REQUIRE them to use. The Schedule EIC (Earned Income Credit). The form only has questions to qualify children for EIC. If a filer has no dependent children the form is not require by the IRS. But, HR Block insists it be done. Examine the publication instructions for form 1040. The is only one condition to require the form – children.

    So, we can easily figure that at least 30 million returns were filed by HR Block where EIC applies. That’s $450 million HR Block bilked on them.

  16. Joe
    Posted July 24, 2014 at 4:07 pm | Permalink

    I spent my first 3 seasons HRB while I was working on my accounting degree. There are lots of prepares there who are knowledgeable, experienced, and really care about their clients. For everyone one of those however, there are 3 more who barely passed their tax class and would be completely lost without their computer. That’s not to say that I think everyone would be fine doing their own taxes. I had one woman who I got back an extra $4,000+ because she didn’t think that she could still claim her daughter. TurboTax had an ad campaign comparing themselves to a GPS. The problem with that is that if a GPS takes you to the wrong place, you’ll know it when you get there. If TurboTax takes you to the wrong place, you have no idea. Unless you know which credits and deductions you’re eligible for, and why you’re not eligible for the rest, you shouldn’t be doing your own return.

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