Other Tax Preparation Chains

Jackson Hewitt and others

After H&R Block, Jackson Hewitt (*est. $100-$150 for average return) is the largest tax-preparation chain in the country, with almost 7,000 storefronts that prepare about 10 million returns annually. What sets Jackson Hewitt apart from H&R Block are its slightly lower fees and its partnership with Wal-Mart stores (though most Jackson Hewitt locations are freestanding). Otherwise, Jackson Hewitt and H&R Block offer very similar services: tax preparation, refund-anticipation loans, and prepaid credit cards on which these loans can be deposited. Interestingly, H&R Block recently sued Jackson Hewitt for infringing on this idea.

If H&R Block has been given a hot bath by customers and regulators, Jackson Hewitt has been boiled alive. In April 2008, the U.S. Department of Justice filed suit against 125 Jackson Hewitt locations (all of them franchised rather than store-owned), claiming millions of dollars in tax fraud, and in 2007 the firm paid $5 million to California to settle charges related to its own marketing of RALs.

From a consumer perspective, we found a huge number of negative comments about Jackson Hewitt at customer-feedback sites like ConsumerAffairs.com. H&R Block has also generated a significant amount of complaints, but most of them pertain to the chain's marketing of RALs; complaints about Jackson Hewitt focus not only on RALs, but also on poor customer service and errors in tax preparation. Of course, your own experience will depend on your specific location and tax preparer.

Once you get past H&R Block and Jackson Hewitt, the market share for tax preparation grows very thin. The third-biggest chain in the U.S. is Liberty Tax Service, which was founded a few years ago by one of the originators of Jackson Hewitt and has shown up in a few magazines as a good franchise opportunity. As of this writing, Liberty Tax Service has about 2,300 outlets, which prepare about 5 million returns a year and provide the same kinds of services as H&R Block and Jackson Hewitt (including ancillary financial products like RALs). As yet, we haven't found many reviews of Liberty Tax Service, either by financial experts or customers, but we'll update this report as they become available.

If you're not interested in visiting a tax preparation chain, be sure to see our report on tax preparation software. You may also be interested in the IRS Free File Program (*free for most filers with incomes up to $54,000). This program uses software from third-party vendors like TurboTax, and it's available via the IRS website for the large number of filers whose adjusted gross income is less than $54,000. Preparation of state taxes isn't always free, however, and not everyone is comfortable preparing their taxes online. Experts say that the Free File Program can be a better option than using tax-preparation chains, because it will save you money.