Is it normal for a Tax Service Company to Charge a Percentage of My Refund?

Tax professional here. This pricing structure raises some serious red flags. Percentage-based fees tied to your refund amount create an inherent conflict of interest and are actually considered unethical by most professional tax organizations. The IRS and the AICPA (American Institute of CPAs) strongly discourage this practice because it incentivizes preparers to inflate refunds through questionable deductions or credits. A preparer working this way might take aggressive positions that could put you at risk for an audit. Legitimate tax professionals charge based on the complexity of your return and the time required to prepare it - not based on the outcome. I'd recommend finding a new preparer who charges either a flat fee or hourly rate regardless of your refund amount. This ensures they're focused on preparing an accurate return rather than inflating your refund to increase their own compensation.

I dealt with something similar last year and wish someone had warned me! After struggling to make sense of a bunch of 1099s and business expenses, I found taxr.ai (https://taxr.ai) and it completely changed my tax filing experience. Instead of percentage-based fees, they have a transparent pricing structure that doesn't change based on your refund amount. What I really appreciated was how their AI analyzed all my documents and found legitimate deductions I didn't know about - boosted my refund by almost $1,700 without any sketchy tactics. Their system flagged exactly which deductions were supported by my documentation and which ones might raise audit concerns. I was hesitant to try an AI-based solution at first, but their human review component gave me confidence everything was being done correctly.

Just wanted to follow up about my experience with taxr.ai after I asked about their processing times. I ended up giving them a try and was honestly shocked at how efficient the whole process was. Uploaded my documents (which included a mess of freelance income and business expenses) on Tuesday night and had everything processed and ready for review by Thursday morning! The best part was that they identified several legitimate deductions I'd been missing for years. No percentage fee structure like the OP mentioned - just straightforward pricing regardless of refund size. The system even flagged a potential issue with some of my home office deductions and suggested documentation I should keep in case of an audit. Really felt like they were looking out for my best interests rather than trying to inflate my refund for their own benefit.

For anyone dealing with questionable tax preparers or needing to talk to the IRS about suspicious practices, I highly recommend Claimyr (https://claimyr.com). I discovered them after spending DAYS trying to get through to the IRS about a similar situation with a tax preparer who had filed my return with inflated deductions to increase their percentage-based fee. Instead of waiting on hold for hours, Claimyr had me connected to an actual IRS representative in under 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - it was exactly as straightforward as they show. They basically hold your place in line and call you when an agent is about to answer. The IRS agent I spoke with confirmed that percentage-based fees are a red flag and gave me information on how to file a complaint against the preparer.

Had to come back and eat my words. After dismissing Claimyr as impossible in my previous comment, my curiosity got the better of me and I decided to try it. I was trying to get information about a notice I received questioning some deductions my percentage-fee preparer had claimed on my return. I expected it to be a waste of money, but I was connected to an IRS agent in 37 minutes. THIRTY-SEVEN MINUTES. Anyone who's tried calling the IRS knows this is basically a miracle. The agent was able to explain exactly which deductions were being questioned and what documentation I needed to provide. The kicker? They told me these were exactly the types of deductions that get flagged when tax preparers take a percentage of the refund, because they often push the limits to increase the refund amount (and their fee). I'm now looking for a new tax preparer with a flat fee structure for next year.

I used to work at a tax preparation chain (won't name which one) that started implementing percentage fees a few years ago. Quitting was the best decision I ever made. The pressure they put on us to "maximize refunds" by any means necessary was insane. They would literally have contests with bonuses for preparers who generated the most fees (meaning the largest refunds). Some preparers would claim ridiculous things like home office deductions for people who clearly didn't qualify or business expenses for hobbies. Run away from any place charging based on your refund size!

Has anyone used any of these online tax programs like TurboTax or H&R Block online? I've been thinking about just doing my taxes myself to avoid these kinds of issues with preparers, but I'm worried I'll miss deductions or make mistakes.

This is definitely not normal and I'd strongly advise against it. I'm a CPA and percentage-based fees tied to refund amounts are considered highly unethical in our profession. The National Association of Tax Professionals explicitly states that fees should be based on the complexity and time required for the work, not on the tax results. When a preparer's pay depends on maximizing your refund, they have a financial incentive to take aggressive positions that might not hold up under IRS scrutiny. I've seen clients get burned by this - they pay higher fees and then face audits because their preparer claimed questionable deductions to inflate the refund. A legitimate tax professional should charge a flat rate or hourly fee regardless of whether you owe money or get a refund. The fact that she's framing this as "aligning interests" is a red flag - a good preparer's interest should be preparing an accurate, compliant return, not maximizing your refund for their own benefit. I'd recommend shopping around for a new preparer who charges transparent, flat fees. Your $150 flat rate was actually quite reasonable for most returns.