I’ve been quoted recently (Reuters via Baltimore Sun) warning consumers that getting your taxes done for “free” in an HR Block kiosk at Walmart and then getting your tax refund on a Walmart prepaid card comes with pitfalls, including (1) fees and (2) the chance that you’ll just dump the money on the card into impulse purchases at Walmart, which “is not your friend.”
Now, David Rothstein, a research fellow at New America Foundation and director of an asset-building program at Policy Matters Ohio, has a short paper — “There’s a Cost to “Free?” — explaining even more of the pitfalls and in greater detail. Excerpt:
“Who doesn’t like getting something for free? And who dislikes doing their taxes? HR Block, Jackson Hewitt, and Walmart have packaged these two sentiments into a massive marketing campaign for free tax preparation. But is it really free? Not so much. […] But is it deceptive? The program only covers the 1040 EZ form, as revealed in the fine print. Most families, especially those getting a tax refund because of the Earned Income Tax Credit (EITC), are not going to use that form. According to Block, only 16% of their clients were eligible for the 1040 EZ in 2010.”
Rothstein goes on to point out that taxpayers, including those filing any other form than the EZ, which would include all taxpayers with kids, all taxpayers requesting the EITC and all taxpayers with any non-standard deductions, have better options that really are free:
“There are options that really are free to the taxpayer, the IRS’ VITA Program, the Benefit Bank, and many others. There’s no problem with Block, Hewitt and Walmart making money off of tax preparation, it’s a service that people are willing to pay for (billions and billions altogether). The question is whether there’s a problem marketing something as “free” when it isn’t for 84% of your customers. The Consumer Financial Protection Bureau has a charge to “restrict unfair, deceptive, or abusive acts or practices.” Does this campaign cross that line? Here’s hoping we find out soon.”
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.