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Liberty Happy with Cash Advance Test

John Hewitt, Liberty TaxLiberty Tax Service is happy with a test of its cash advance program for the 2013 tax season. But beyond that, John Hewitt, CEO of Liberty and its parent JTH Holdings, was stingy with details about its operation as the company announced results for its third quarter ended January 31.
The chain tested the Instant Cash Advance program, which it hopes can fill the gap left by the death of Refund Anticipation Loans, in 27 states. But that test lasted only until February 8. Hewitt said  during an earnings webcast that once W-2s are issued, "demand pretty well dries up".

"We are committed to continuing the development of financial products that are demanded by some of our customers," Hewitt said. The company found that stores with the financial products did slightly better than stores that did not offer them. But it gave no details.

Meanwhile, the financial focus revolved largely around impact of the delayed start of the tax season. Like its competitors, Liberty saw revenue drop sharply for the early part of the tax season, but finds that filings are catching up with the year-ago rates. For the most recently ended quarter, the number of returns was down by 27 percent, which was slightly better than the decline reported by H&R Block and by Intuit for its TurboTax results.

Net income dropped to $1.1 million, down from $4.7 million in last year's corresponding period. Revenue for the January quarter dipped to $30.6 million, off 14.3 percent from $35.7 million a year earlier. However, by February 28, filings were down 1.4 percent with revenue up 5.1 percent. The revenue picture was aided by an 8-percent-to-9-percent increase in average Liberty fees.

The situation in the national government resulted in more than late filings. The worries over the impact of the fiscal cliff hit the franchise operators and prospects. "The fiscal cliff was that thing that really kept people from coming into the business or expanding," Hewitt said.

The delay by the Internal Revenue Service in accepting returns also changed the shape of the season. Normally, tax season has a ramp up, but that did not occur this year. "Our offices were full from the first day of filing," Hewitt said. And with the switch over to the modernized efiling system, 35 states did not test their systems before the season and when issues occurred the old system was not available as a backup.

Hewitt also said that mom-and-pop preparers continue to lose ground to the national chains. He noted increases reported by Block and the greater increases registered by Liberty.

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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