Fee scraping is one of the most overlooked profit leaks in the tax industry. It happens when a portion of your tax preparation fee is withheld by your software provider or banking partner before the money ever reaches you.
Many preparers do not realize it is happening, or believe it is simply a necessary cost of doing business. It shows up as a deduction in the refund transfer settlement, buried in a fee schedule most people never read closely.
How It Works
When a client chooses a bank product such as a refund transfer, the funds flow through the banking partner before reaching the preparer. That settlement process can deduct a portion of your preparation fee before disbursing the remainder to you.
The amount varies, but it is not uncommon for preparers to lose 5 to 15 percent of their fees across the course of a season. On a 400-return season averaging $300 per return, that is between $6,000 and $18,000 that never reaches your account.
Fee scraping is legal. It is typically disclosed somewhere in the agreement you signed. But that does not mean you have to accept it.
How to Check If It Is Happening to You
- Pull your end-of-season settlement report from your software or banking partner
- Compare the total fees you charged clients against the total you actually received
- Look for line items labeled as network fees, technology fees, or service fees deducted at settlement
- Use the Profit Edge Tax Software Cost Calculator to add everything up
What You Can Do About It
The most effective solution is to work with a provider that explicitly guarantees you keep 100 percent of your tax preparation fees. This means your fees are yours in full, with no deductions at settlement.
At Profit Edge Tax, fee retention is a non-negotiable part of every program we offer. If you are currently losing fees at settlement, that alone may justify a software switch.
Take the Profit Leak Assessment to identify other areas where your business may be losing revenue it has already earned.