Wal-Mart Stores Inc. is partnering with tax preparation companies Jackson Hewitt Inc. and H&R Block Inc. to offer free tax prep at more than 3,000 stores, in a move that could boost deposits on the retailer's prepaid card.
Wal-Mart, like its two tax-preparation partners, sells prepaid debit cards that its customers can use instead of traditional debit cards or bank accounts. By partnering with the tax companies, Wal-Mart will now be able to encourage those customers to get their tax refunds loaded directly onto their cards, instead of via checks.
That could be a limited but significant boost for Wal-Mart's prepaid program. Tax refunds provide a one-time but sometimes lucrative source of funds for consumers each year, especially for low-income taxpayers who can take advantage of certain tax credits. Low-income consumers are many of the so-called underbanked who are the main users of prepaid cards.
"For Wal-Mart, not only does it drive business into the store, it also extends the utility of their particular prepaid product," says Madeline K. Aufseeser, a senior analyst with Aite Group. "To the extent that Wal-Mart can create a stickier environment for the card, it's a great thing."
The government returns more than $300 billion to consumers in tax refunds each year. Capturing even a sliver of that amount is an attractive boost for Wal-Mart and other nonbanks that sell alternative financial products.
Customers having their taxes prepared at Wal-Mart will be able to choose among a variety of prepaid cards, including the retailer's own card, according to company spokeswoman Sarah Spencer. Jackson Hewitt and H&R Block both offer prepaid cards that will also be available, she adds.
Customers will also have the option of having their refunds deposited into a bank account or sent as a paper check.
Those choosing to receive their tax refund via prepaid cards will have to weigh the fees involved in using those cards.
Wal-Mart generally charges $3 upfront for its card, plus $3 a month and $3 for each deposit. But the $3 card fee is waived if the consumer deposits more than $1,000, which could be the case for many receiving refunds, says Wal-Mart's Spencer.
H&R Block offers its card free when a refund is loaded and does not charge a monthly fee; Jackson Hewitt does not charge upfront for a card loaded with refund money, but has a $4.95 monthly fee. Customers using either card have to pay fees when reloading their cards using services from third-parties including Green Dot Corp.
This is the first year that the tax prep companies will be helping consumers fill out the most basic 10-40EZ tax form for free at Wal-Mart. Other services are available for a fee, though the companies did not disclose specifics.
Last year, Jackson Hewitt offered tax services at a smaller number of Wal-Mart stores, and charged $38 for the 10-40EZ.
H&R Block spokesman Gene King says the company was in Wal-Mart stores several years ago, but not in the last two years. The company offered free 10-40EZ prep online and in stores last year, he added.
The world's largest retailer
Expanding its presence in the tax prep market may also help shine a light on Wal-Mart as consumer friendly in the financial sphere, says Patricia Sahm, a managing director at Auriemma Consulting Group.
"It's a helpful service. You have knowledgeable folks" helping people prepare their taxes and "that positions Wal-Mart potentially in a positive way when you think about the whole regulatory environment," Sahm says.
