H&R Block's offer of free preparation for 1040 EZ returns boosted its number of returns for the third quarter ended January 31. But it also produced a drop in revenue and contributed to a loss in the quarter although delays in filing of more complex returns also had an impact. The company also noted it wrote down $22.7 million in impaired goodwill for its RedGear unit, which markets the TaxWorks line of tax preparation software.
Block lost $12.7 million compared to net income of $50.6 million in last year's corresponding period. Revenue for the most recently ended period. Revenue was $851.5 million, down 8.9 percent from $935.9 million a year earlier. Tax services revenue fell to $672.8 million, a decrease of 10 percent from $747.7 million a year earlier. CEO
Alan Bennett said he was pleased with the performance and that the company gained marketshare in retail and online preparation.
The tax preparation totals were complicated by the delay of the Internal Revenue Service in accepting returns, which are generally more complicated and yield higher revenue. Block said the loss of its refund anticipation loan business also caused a similar decrease. However, once the IRS started accepting all returns in February the rate of returns prepared increased sharply with the number prepared in February rising by 17.2 percent leading to a 6-percent increase for the tax season to date.
Block experienced the same trend towards online preparation that has occurred throughout the industry. An overall increase of 3.2 percent in returns prepared at retail stores compared with losses in each of the last several years. Digital tax returns rose by 12.7 percent with those filed online up by 30.2 percent.
The amount written off for RedGear was part of $36.5 million in after-tax charges which included incremental credit losses on the Emerald Advance line of credit, and costs of litigation. The company said the RedGear write off stemmed from lower than expected settlement product revenue and left the value of the remaining goodwill at roughly $14 million.
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
