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Estimated reading time: 2 minutes, 19 seconds

Free RACs Gained Share; But Cost Block

William Cobb, H&R BlockH&R Block will not repeat its offer of free refund transfers, RACS, during the next tax season. And one reason is that probably that while the giveaway helped the tax services company gain market share it cost the company on the top and bottom line as income from tax services dropped by 34.7 percent and revenue fell by 1.7 percent for the year ended April 30.

"We do not expect to continue the free RAC promotion next year," said CEO William Cobb. However, he said pricing had not been determined and largely declined to discuss plans for next tax season because of competitive issues.  Still Cobb felt good about the last tax season as he said it reversed two straight years of losses of clients and market share. Cobb outlook for next year for competitive reasons.

Earnings from tax services dropped to $266 million for fiscal 2012, down from $406.1 million the prior year. Revenue fell to $2.86 billion, off from $2.91 billion for fiscal 2011. With the company reporting results from continuing operations after its sale of RMS McGladrey, the tax services operations represented substantially all of the results reported by the Kansas City, Mo.-based tax chain. However, the company says the number of returns prepared via its network rose by 4 percent over the prior year while the total reported by the Internal Revenue Service was up only 2 percent. Block estimates it gained 30 basis points of total U.S. market share, including 75 basis points of share in the do-it-yourself category and 10 basis points of share in the assisted category

The company also opened offices in India recently, which is the fourth country in which it is operating outside of the United States.

In an earnings conference call, Cobb continued to picture rival Intuit as facing increasing pressure to find growth as the number of manually prepared returns decline dramatically, the source of many of the gains that company has made. Cobb said Intuit's decision to offer professional advice to taxpayers during the 2012 tax season underscores the kind of advice that Block has known that its customers need.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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