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Block: Squeeze on Independent Preparers to Continue

Greg McFarlane, H&R BlockIndependent tax preparers have lost market share and will continue to be under pressure, H&R Block said this week. In comments made an an investor's day webcast, Block reported that independents, which it says comprise 44 percent of the preparation market, had lost about 1 percent of market share since 2010.

About half of the independents prepare 100 or fewer returns a year each, according to Greg McFarlane, the company's CFO. "Some of them are doing a good job; we believe many are not," he said.

Overall, Block says research shows an 8-percent drop in the number of preparers over the last two seasons. It believes much of that change is driven by the end of Refund Anticipation Loans.
He said independents are going to find difficulty in dealing with the added requirements of the Affordable Care Act.

McFarlane also backed up his claims by citing information about efiling reject rates that were reported by the Internal Revenue Service. The reject rate for CPAs was 3.8 percent and 8.2 percent for the independents. The highest reported rate was the 13.2 percent for check chasing organizations. H&R Block reported its rate was 4.5 percent, the second lowest among 11 different preparer categories. Independents were fifth in the group.

Independents are certainly not going to be helped out by the number tax returns filed in the next tax season.The number dropped slightly last year and Block is predicting growth of zero to 1 percent for the 2014 tax season. It expects a return to the typical annual increase of 1 percent to 2 percent, which McFarlane said normally parallels growth in non-farm employment.

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