Well, if you do your taxes and make a mistake, it's your problem.  If the tax place makes a mistake (assuming you provided all the correct documentation) then it's their problem.  You basically pay so that they have the responsibility.

Same reason that bloodwork for a dog cost 80% less than the same bloodwork for a human- it's all how much it would cost if you get sued.  $250 isn't much when you figure in liability along with the time it takes somebody to actually process the return.

The other service you gain is being interviewd by somone who is supposed to know all the right questions to ask. I have used the online services every year except one since I was no longer a part of the LLC we had. The one year I had someone else do my taxes, I got back a little more than what I could have figured out online. It barely covered the fees.

Pay the bucks to have someone do it if you have reasons to itemize your deductions. If you are taking the standard deduction, it's just not worth the cost. 

I see it much the same as realtors- if you decide to sell your house on your own (or on the internet as has become popular recently) you can win big time in that you get to keep the percentage of the sale that would otherwise go to the realtor.

The downside of this is

1) Time- you have to do all the legwork yourself. If your situation is straightforward and simple, and you understand what you're doing, you're definitely better off  on doing it on your own. If you don't have the time and don't know the first thing about selling a house, you're probably better off going with a realtor... unless you want to take the time to familiarize yourself with the ins and outs, which again, means more time before you can sell.

2) Complexity- this ties into # 1. If the issue is straightforward, do it yourself is no problem. If you've got lots of  investments, RRSP's and tax-deductibles you want to go through someone who knows the system so that you don't end up burning yourself.

I suppose this relates to anything in life- ie;

Represent yourself in court or pay a lawyer?

Fix your car (if you know what you're doing and it's a straightforward job) or take it to a mechanic? (and run the risk of being taken to the cleaners)

Same goes for selling a house, same goes for doing your taxes.

No matter which way you cut it Charles, however, one thing generally holds true. Our society is built upon the feller with specialized knowledge squeezing the fella without that knowledge for pennies. I'm not saying it's a good or a bad thing, but just the way things have hashed out in the end.

I don't know about you, but I've yet to find a dentists office that's not luxurious and well-appointed!

Charles a lot of it is just plain laziness and greed. The forms are scary and can be confusing to a culture that seems to be reading less (entertainment excluded). It's too hard for them. Others think that somehow they will get a lot more back (and can be true in some cases) than if they did it themselves.

What gets me is the folks (about 40%) that are going to get every penny they paid in back. Why do they bother to pay for this service? Back to my first point, laziness. When I was in the military I would help my guys do it themselves, instead of paying someone. You'd be surprised how many single folks without deductions thought they needed to pay to have someone do their EZ form!

I use Turbo Tax now, since 1999, mostly to keep track of my IRA basis, but also because I can pull up a nice .pdf of any year I filed in 2 minutes. This came in handy recently for a security clearance and the wifes immigration forms. If I come up agaist a tax issue I am unsure of, I research it myself.

That's a big part of it too. Folks are willing to pay big for those refund "loans". What a racket they are. If you calculate what you pay to get "your" cash three weeks earlier, the interest rate would be astronomical. I've never needing the money bad enough that I couldn't wait 3 or 4 weeks. Good point Charles.

This was the first year I used e-file (it was free) and I got my refund back in 9 days.