A Worker's Life Under H&R Block 

Tax season is over and you know how much you're getting back. Some workers at H&R Block wish they could say that about their wages.

Few people now remember that the Internal Revenue Service once prepared tax returns for free. Tired of chronic complaints about its many mistakes, the IRS began discontinuing this service in the mid-1950s. News of this decision arrived in Kansas City at the same time that Henry Bloch's family bookkeeping business also planned to abandon tax preparation. But one of Bloch's clients had a better idea. He convinced the bookkeeper to capitalize on the government's retreat by offering to do anyone's taxes for a simple, five-dollar fee. Bloch's firm was promptly deluged with business.

In 1955, Henry and Richard Bloch changed the spelling of their firm's name to H&R Block to avoid confusion. The company grew quickly, becoming the national leader in tax preparation and currently completing about 20 million US tax returns annually. In the 1960s, Block started training legions of temporary tax preparers in company tax courses, now taken annually by some quarter-million Americans at a cost of up to $199 per class.

To hear Block tell its story, the firm embodies the democratic spirit — born from offering small businesses and individuals of modest means the tax and financial planning services traditionally available only to the wealthy. But how well does Block's reality match its hype? As a temporarily underemployed industry analyst with basic accounting knowledge, circumstance led me to find out. In October 2006, I enrolled in a Block tax course at its Pleasant Hill office. My classmates included a lawyer, more than one accountant, and a couple of financial counselors.

As I researched my potential employer, I naturally wanted to find out what I would be paid as a Block tax preparer. You would have thought I was asking the Pentagon how to steal hydrogen bombs. I tried calling a district office and even national headquarters, but the consistent answer was silence. For most new employees and many more, the truth was that Block paid something virtually indistinguishable from California's minimum wage. Although there was a bonus system, relatively new employees barely benefitted from it, if at all. The company's unresponsiveness on this issue seemed to highlight a central tenet of its business strategy.

Obfuscation about compensation was a standing joke throughout our 66-hour course. In response to persistent questions from me and some of my sixteen classmates, our teacher, who I will call Val, claimed that she had no idea what Block paid since she hadn't prepared taxes in years. That didn't stop her from regularly regaling us with the seductive Block dream. "You can make any amount of money you want to," she allowed. Val periodically recited the tale of "one woman" she had "heard about" who made $40,000 each three-to-four-month tax season, supporting herself for the year.

Doubtless there were experienced preparers who did relatively well; tales of their success were circulated relentlessly. But a very large proportion of tax preparers were in their first few years.

At our next-to-last class session, we were honored with a visit from the company's Walnut Creek district manager, who I will call Jimmy. He casually informed us for the first time that we would "actually" need to take another course before we could work for Block. It would teach us the company's automated tax-preparation system, which we would generously be paid the minimum wage to learn.

However, Jimmy did provide what I thought was our first hint of what we might expect to earn at Block. "How would you like to make your living in four months of the year?" he asked, echoing Val. Only in our first year would our up-front salary have to be relatively basic, he told us. The way to earn much more was through the company's legendary, production-based "bonus," which also set the level of our base pay in subsequent years. For example, Jimmy explained that if we made $20 an hour in salary and bonuses as first-year tax preparers, when we came back for our second year our base pay would automatically rise to 80 percent of that. Finally, we had the clue we'd been seeking: a first-year tax preparer might make $20 an hour with bonus. This was extremely disappointing, but presumably only an average.

Imagine my surprise when Jimmy told me the next evening that "realistically" no first-year tax preparer in his district made more than $17 an hour the year before — and even that was atypical. Second-year employees did little better. Jimmy said we needed to have "reasonable expectations," adding, "Maybe this isn't something you really want to do." After all, he said, most new employees "weren't in it for the money" the first few years, but rather for "the experience."

"We just don't pay people $25 an hour," he added, as if that were the pinnacle of economic achievement no-accounts like me hoped to squeeze out of unsuspecting multinational corporations.

Jimmy certainly seemed to have no worries about my reaction. Given the way Block churns out tax preparers, he had far more candidates than he could ever use.


Part of what ensured that Block had too many candidates already seemed clear to me. Val had told us early on that if we didn't know the answer to one of the tax course's many tests we should just check with her, and she would tell us.

"What I want is to make sure you all know how to do taxes, not to get a score on a test," she said, implying that studying to earn individual grades contradicted this higher goal. I asked explicitly, both in class and privately, if this approach was endorsed by the company. Val, who said she had taught at Block for many years and worked as a manager and tax preparer for many more, assured me it was "the Block way." When Jimmy confidently predicted that we would all pass the final and class with flying colors, we thought we understood how he knew.

Most of our time in class was spent mechanically reviewing problems assigned the night before. Val displayed the correct answers on the projector, taking little apparent interest in whatever mental process led to them. Students looked at the official answers until they or someone else figured out the problem. Whenever someone raised a hard question or asked about a complicated issue, Val would say irritably: "You'll never see a case like that." She declined to address complexities or potential contradictions — which, of course, abound in tax law. We should look it up.

Our frequent quizzes were done first on a practice basis, with students advised of the right answers before final grading. The midterm was done in teams, with Val again providing correct answers before grading. On the all-important final, which accounted for a majority of our grade, Val told us to ask if we had any doubt about our answers. Together, we reviewed the answers aloud before grading, like much younger students.

This policy ensured that everyone passed, but it also seemed to render meaningless the California licensing requirement designed to ensure that certified preparers know tax law.

There was no way to assess the expertise of anyone in class from grades. Nor was there any detectable effort to assess skills and abilities in the hiring process I underwent. But given how little we actually had to know in our jobs, this approach probably made sense for Block.


The Block course did teach a lot about taxes, at least for those who did the homework. I'd still recommend it to anyone who wants to know how to prepare different kinds of taxes. But to work for H&R Block, did it matter how much we knew? There seemed to be little connection between the state-mandated course content and the reality of the office in which I worked.

Most new preparers had few decisions to make. The only required skills seemed to be the ability to ask a series of questions and enter data inputs on a screen. Most returns no doubt turned out accurately, but any perception of in-depth human review was an illusion.

When the second training course was over in January, it was time for the real thing. This was serious business, and we must dress to match. In keeping with Block's ongoing patina of quality, the Oakland district manager emphasized that we must wear ties and never jeans, and that our customers would know us by the exalted title of "tax professionals." Yet under our contract, us professionals were making eight dollars an hour, less than 90 percent of Bay Area workers — and even most of our clients.

The extensive contract signed by each worker enumerated only the worker's obligations — not Block's. Employer requirements beyond the low up-front salary were conveniently omitted. While the pivotal and virtually indecipherable bonus system was described in a companion document, it was left out of the contract.

One of the few schemes as bizarrely byzantine as today's federal tax code is the one by which H&R Block pays bonuses. Employees are given credit for each tax return they complete and additional Block service they sell. Employees also receive extra commission for each year of prior Block employment and each level of advanced training they attain. If the total commission on these items exceeds the employee's hourly base salary, the excess will be paid as a bonus several weeks after tax season is over.

This legendary "bonus" is what employees pin their meager hopes on. I guess I was a relatively productive first-year worker, so even though I only worked part-time for Block for a month beyond training, I got a tiny "bonus" of about a dollar an hour, better than most of my first-year colleagues. I would have earned more if Block's Oakland headquarters hadn't overruled my manager and retroactively reclassified more than one-third of my hours from "training" to "tax prep," thus increasing the base salary against which my pathetic bonus eligibility was compared. In fact, these hours were actually time spent on practice problems.


One thing H&R Block is very up-front about is that anyone can walk in off the street, get his return done, see the results, and then drop the whole thing and walk away owing Block nothing. In other words, a customer has no obligation to file or pay for the return Block prepares for him. This is a real boon to clients, but Block pays for its generosity on the backs of its workers.

Customers often abandon returns — for example when they're hoping for big refunds that they don't have coming. Customers of modest means often don't have $100 to $200 set aside to pay for tax preparation unless they get such refunds. Every time a customer walks away from a return, an employee who is hoping for a year-end bonus loses money.

People have many reasons for not accepting their returns. At my office, in the largely Latino Fruitvale neighborhood, many immigrant workers got to the end of their return and realized they couldn't use the Social Security number they'd provided because it wasn't really theirs. Their return would be abandoned, wasting a tax preparer's hour. Then there were cases like the woman who filled out her return using one child as a dependent. When the IRS refused to allow her to claim that child, she named another child. These were eventualities for which we never prepared in class.

To make any money as preparers, we were pressed to push add-ons. These are services at the heart of lawsuits Block has paid more than $100 million to settle in recent years, according to company filings with the Securities and Exchange Commission.

The first money-making gem went by the Orwellian title, "Peace of Mind," though seemingly designed to foster anxiety. Although Block said it stood behind its work and will pay penalties and interest due to any error it makes, for a mere $29 it offered customers the "guarantee" that if they lose up to $5,000 due to a company error, Block will pay the taxes owed and send a representative to participate in any audit.

I tried hard to get my arms around this. A mistake will apparently have cost a taxpayer as much as $5,000, yet the government will not return the money — nor will Block be responsible for the taxes unless the requisite $29 (now $30) was paid. How can this happen? Does anyone truly believe our government won't return taxes paid or collected in error? Granted there may occasionally be circumstances in which "Peace of Mind" could be of use. But such eventualities are rare and the contingencies poorly understood by customers, which makes this a questionable purchase. SEC filings indicate that Block makes more than 70 percent margin on "Peace of Mind" — probably not counting the cost of lawsuits. Giving how little effort is involved, selling "Peace of Mind" is a much easier way to make money than tax preparation. So if workers want to make anything approaching a living wage, they have little choice but to push this guarantee.

"Refund anticipation loans," another add-on, also play on customers' lack of sophistication — which is clear from the many customers who throw away hundreds of dollars to get back thousands a few weeks sooner. Company securities filings again show that a big piece of Block's profit comes from these complex, aggressively promoted schemes by which the firm charges people double-digit interest rates to essentially borrow back their own money.

Another Block policy, its supposedly rigorous "Quality Plus Review," purported to ensure that some returns would be reviewed by a second Block worker. What it actually meant in our office was that the preparer eventually entered another preparer's ID number into the tax software, as if to notify the system that the second worker had signed off on the return. In my experience, no actual review of returns by a second preparer ever took place. It was clearly understood that none ever would. My colleagues and I understood this to be company policy, verified by our manager.


H&R Block focuses on Americans of quite modest means — both as customers and workers. (And Block only recently extricated itself from a similarly focused product line — sub-prime mortgages.) It paints a picture of "tax professionals" who understand the arcana of tax law and give careful consideration to every return. The reality is unevenly prepared workers who rely on automated software that locks up repeatedly. Once employed by the company, their only chance of making anything approaching a living wage is to generate a high volume of returns, allowing little to no time to concern themselves with advice, planning, or individual client situations. And true success depends on pushing a convoluted "guarantee" of questionable value and the various loans by which the company charges people for helping them get their tax refund a little sooner.

The company's approach to hiring is to maximize the pool of people available to work near minimum wage in an automated environment in which reliance on skill and knowledge is minimized. In this way, Block earns tens of millions of dollars in tuition while amassing a large supply of people legally able to prepare taxes.

Central to its strategy is obscuring what its "tax professionals" are paid. Far more people go through Block classes than would if they had realistic information up-front. And imagine how much credibility customers would give such "tax pros" if they knew we were being paid eight or nine dollars an hour to handle their returns.

At least Block was kind enough to send its employees the following notice in time for our own tax returns: "NOTICE TO EMPLOYEES: Based on your annual earnings, you may be eligible to receive the earned income tax credit from the federal government. The EITC is a refundable federal income tax credit for low-income working individuals and families. The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, SSI, food stamps, low-income housing or most [Temporary Assistance for Needy Families] payments."

H&R Block|Refund anticipation loans|Peace of Mind

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