Report: High fees erode earned income tax credits at H&R Block, Jackson Hewitt, Liberty Tax

A survey of tax preparation fees found that individual filers pay “large sums” to H&R Block, Jackson Hewitt and Liberty Tax to help them collect the earned income tax credit intended to help lift many out of poverty.

The Progressive Policy Institute said its survey of taxpayers in Baltimore and Washington, D.C., earlier this tax season found that the national chains’ fees averaged $400 and absorbed between 13 and 22 percent of the average refund generated by the credits.

EITC, as the program is commonly called, provided nearly $67 billion in credits to 27.5 million lower-income filers last year, with the average credit totaling $2,400, the institute’s report said.

It concluded that lawmakers should change the tax credit program, making it simpler and “relieving low-wage workers of the burden of having to pay to claim benefits they’ve earned.”

Kansas City-based H&R Block blasted the report as “a competitive attack hidden behind the guise of academic research.” Liberty Tax, in an email, disputed the institute report’s accuracy. Officials at Jackson Hewitt did not respond to an inquiry.

In a lengthy statement, Block sought to discredit the report by saying co-author Paul Weinstein Jr. was a speaker at an forum sponsored by Intuit, the maker of TurboTax, in January 2015. Block further questioned who funded the study.

The reports from the institute, a liberal policy group in Washington, D.C., and Block, a for-profit tax preparation company, battled over the location of tax offices, error rates on returns claiming the credit, free tax filing assistance and other issues.

For example, the Progressive Policy Institute said tax preparation chains “target EITC filers” by placing offices in neighborhoods with a high percentage of filers eligible for the earned income tax credit. Block said that its offices are scattered nationwide and that it has an office within 5 miles of 95 percent of the nation’s population.

Liberty Tax similarly disputed the institute’s claims about locating offices.

“We locate our franchise territories by population, not income,” the email said. “We’re still building out our system, but metropolitan areas where the customers are nearby tend to be more popular.”

This story was originally published April 14, 2016 at 11:11 AM with the headline "Report: High fees erode earned income tax credits at H&R Block, Jackson Hewitt, Liberty Tax."