Income tax offices in the 'hood: why so many?

[Dan]

The neighborhood where I grew up has changed a lot in the past two decades. Most visitors to the area would now call it "the ghetto" or "the 'hood".

Going down the main business street of the neighborhood, I noticed that there was an income tax office on every other block. Just like wealthy neighborhoods might have two Starbucks stores located across the street from each other, this area had multiple Jackson Hewitt offices within eyeshot of each other.

So, why are income tax offices so prevalent in the 'hood? The only reasons that come to mind are very low rent, making it viable for a seasonal business to occupy the same storefront all year, and what could be the popularity of tax refund loans among lower income groups. True?

[btrage]

It's cheaper/easier for low-income people to pay income tax offices to do their taxes, as opposed to using an accountant, doing it themselves manually, or using an online service.

These businesses go where their customers are.

[imaplanner]

It's cheaper/easier for low-income people to pay income tax offices to do their taxes, as opposed to using an accountant, doing it themselves manually, or using an online service.

These businesses go where their customers are.

This is kind of what I was thinking as well, that wealthier tax-filers would likely not be using a walk-in type of tax office.

[Maister]

Due to the educational standards, a higher concentration in these areas may lack the sophistication necessary to complete a 1040 EZ.
Low rent + (usually) very simple tax prep + volume business = healthy profits

[kjel]

The neighborhood where I grew up has changed a lot in the past two decades. Most visitors to the area would now call it "the ghetto" or "the 'hood".

Going down the main business street of the neighborhood, I noticed that there was an income tax office on every other block. Just like wealthy neighborhoods might have two Starbucks stores located across the street from each other, this area had multiple Jackson Hewitt offices within eyeshot of each other.

So, why are income tax offices so prevalent in the 'hood? The only reasons that come to mind are very low rent, making it viable for a seasonal business to occupy the same storefront all year, and what could be the popularity of tax refund loans among lower income groups. True?

Everyone becomes a tax preparer in the 'hood during filing season. There's a banner on the fence at the bodega next to my office "Get your refund loan now!"

Maister made very valid points and I will add the following:

Poverty-tax refunds that include the Earned Income Credit for children are a big payday and don't count against TANF of Food Stamp benefits
Education-most people aren't aware that a) it's not that difficult to do your own return; b) they don't understand the real cost of a refund anticipation loan
Unbanked-many people around here do not have a relationship with banks or credit unions for a variety of reasons so they cannot avail themselves of online software (requires a credit card/bank draft)

My organization works very hard to get the residents in our community free tax preparation services where they explain what a refund anticipation loan costs them and if they can be a little patient they get the entire amount to themselves. My office building is home to the low income heating and energy assistance program (LIHEAP) so we have 100+ clients that come in every day-we usually have 1 or 2 tax preparers sitting at a desk downstairs February-April to help people with returns or answer questions.

[ursus]

All true. We have a fairly low rent business district in the town I'm working for and we have several tax offices for exactly those two reasons: Low enough rent that although their business is seasonal they can just keep the office, and the loan issue. Several popular "payday loan" offices in the area now also offer not only loans on your tax refund but will do your taxes as well. The lines are blurring....

[WSU MUP Student]

I would agree with all of the above.

I will add that I would imagine that opening up one of the tax offices like H&R Block, Franklin, or Liberty is probably a relatively risk free endeavor for somebody who wants to have their own business (I think most of these are franchises) since you don't need to rent a storefront for a full year and the liability is probably pretty low since most of your clients will likely have very simple tax returns to file since they are unlikely to have much unearned income, dividends, foreign accounts, etc.

My wife is a CPA and previously worked for a very large public accounting firm. Although she handled corporate auditing and tax almost exclusively, most everybody had to do a week or two at a free tax prep clinic in poor neighborhoods each year. Mind you, this is not H&R Block but rather a firm who's average billable hour is probably a few hundred dollars. Besides just filing the taxes for the folks and getting them their refund (if they had one coming) with no fees, they really pushed showing the participants how easy it generally is to file your own taxes and get your money yourself in the hopes that they wouldn't be using some tax prep service with a big fee in the following years.

[Gotta Speakup]

Federal and state tax forms have become critical for getting any kind of assistance, from scholarships to food stamps. And these other forms carrying warnings that any falsehood will lead to jail. We have scared the poor into usu g these services.

[kjel]

Federal and state tax forms have become critical for getting any kind of assistance, from scholarships to food stamps. And these other forms carrying warnings that any falsehood will lead to jail. We have scared the poor into usu g these services.

It's definitely getting that way. My SO has to file a $0 tax return just for reporting purposes to the IRS even though he is not required to file so he can complete the FAFSA form plus the additional state aid application.

[mike gurnee]

Federal and state tax forms have become critical for getting any kind of assistance, from scholarships to food stamps. And these other forms carrying warnings that any falsehood will lead to jail. We have scared the poor into usu g these services.

And forced the seniors. Most state income tax regs include an exemption for seniors: homestead exemptions, sales tax breaks, etc. But there is always some complicated form or record keeping. It's like, 'we offer this, but we know less than 80% will go to the trouble.'

[Linda_D]

It's just NOT the poor who are brainwashed into believing they can't do their own taxes but have to go to one of these tax prep places. It's many middle class people who can file the EZ or 1040 A. Even the 1040 and its attendant forms aren't particularly complicated when all you have is a mortgage, a little bit of bank interest, and IRA deductions. I've done my own taxes for most of my adult life, and I'm NOT an accountant, and I've had some fairly complicated stuff over that time. Yet, I have many friends and relatives who would rather just gather up their paperwork, trot it off to H&R Block or whomever, and pay for the privilege of NOT having to do a little paperwork.

What people don't understand is that there is free help out there. The IRS website is pretty good, and they have a phone help line as well. I've used both. Most states have some kind of tax help line, too. For seniors, AARP and many local senior advocate organizations offer free help. As WSM MUP Student indicated, there is often pro bono tax help for poor people at neighborhood centers.

Finally, if you do hire a tax prep person/accountant to help you do your taxes, you should really have him/her go over your taxes with you so that you understand what he/she's done before you sign that return. If you don't ask, you'll never understand and never learn, and you will always have to pay somebody else to do your taxes -- and NOT understanding what he/she did won't save your butt if the IRS questions/disallows something. Too many Americans are either too lazy or too scared to save themselves some $$$ by doing their own taxes.

[mgk920]

Income taxes have become progressively more and more complex with each passing year, too. And when the Unaffordable Care Act takes its full effect over the next couple of years, stand back - you have not seen anything yet (I have no idea how many more lines will be added even to the 'EZ' form due to it, or if it will even be doable on one page anymore). And then there are the forms in those munis and states with income taxes.





Mike

[kjel]

Income taxes have become progressively more and more complex with each passing year, too. And when the Unaffordable Care Act takes its full effect over the next couple of years, stand back - you have not seen anything yet (I have no idea how many more lines will be added even to the 'EZ' form due to it, or if it will even be doable on one page anymore). And then there are the forms in those munis and states with income taxes.





Mike

For low income folks the returns are not that complex. Cheap rent and refund anticipation loans are key drivers of locating tax offices in the 'hood.

[modhat] Don't bait in this thread. [/modhat]

[Gotta Speakup]

Income taxes have become progressively more and more complex with each passing year, too. And when the Unaffordable Care Act takes its full effect over the next couple of years, stand back - you have not seen anything yet (I have no idea how many more lines will be added even to the 'EZ' form due to it, or if it will even be doable on one page anymore). And then there are the forms in those munis and states with income taxes.





Mike

We have had mandatory insurance here in Massachusetrs for years now. It's a simple box to check. The insurance compny sends you a form telling you if your insurance plan is qualifies. It's shorter than a W2. Bank statements are more complicated.

[DetroitPlanner]

Many of them are predators and they are selling high profit advance loans (file here walk out with a check). Desperate people will fall for this and not even consider the deductions for tax preparation or a 50 percent apr loan rate.

[Linda_D]

Well, somebody must be getting the word out here in Jamestown that EZ-FORMS are EASY to do yourself because HR Block is now trumpeting that they'll do them and file them for free ... of course, at the end of the ads, they whisper that state income tax forms and EIC forms are NOT covered.

[Rygor]

Like others said I'm sure it's a combination of cheap rent, the fact that many of the poor have to file to get certain benefits, almost all of entitled to a refund, plus lack of education.

Also, I'm sure a much higher % of the poor do not even have access to internet/online filing software like TurboTax, Tax Act, etc.