HR Block 2006 Annual Report Download - page 72

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See discussion below and in Item 8, note 19 to our consolidated financial statements.
DESCRIPTION OF BUSINESS
TAX SERVICES
GENERAL –Our Tax Services segment is primarily engaged in providing RALs –RALs are offered to our U.S. clients by a designated bank
tax return preparation and related services and products in the through a contractual relationship with HSBC Holdings plc (HSBC). An
United States and its territories, Canada, Australia and the United eligible, electronic filing client may apply for a RAL at one of our
Kingdom. Revenues include fees earned for services performed at offices. After meeting certain eligibility criteria, clients are offered the
company-owned retail tax offices, royalties from franchise retail tax opportunity to apply for a loan from HSBC in amounts up to $9,999
offices, sales of Peace of Mind (POM) guarantees, sales of tax based upon their anticipated federal income tax refund. We
preparation and other software, fees from online tax preparation, and simultaneously transmit the income tax return information to the IRS
participation in refund anticipation loans (RALs). Segment revenues and the lending bank. Within a few days or less after the filing date, the
constituted 50.3% of our consolidated revenues for fiscal year 2006, client receives a check or direct deposit in the amount of the loan, less
53.4% for 2005, and 51.6% for 2004. the bank’s transaction fee, our tax return preparation fee and other fees
Retail income tax return preparation and related services are for client-selected services. Additionally, qualifying electronic filing
provided by tax professionals via a system of retail offices operated clients are eligible to receive their RAL proceeds, less applicable fees, in
directly by us or by franchisees. We also offer our services though approximately one hour after electronic filing using the Instant Money
seasonal offices located inside major retailers. service. For a RAL to be repaid, the IRS directly deposits the
We offer a number of digital tax preparation alternatives. TaxCut˛participating client’s federal income tax refund into a designated
from H&R Block enables do-it-yourself users to prepare their federal account at the lending bank. See related discussion of RAL
and state tax returns easily and accurately. Our software products may participations below.
be purchased through third-party retail stores, direct mail or online. RACs –Refund Anticipation Checks (RACs) are offered to U.S. clients
Clients also have many online options: multiple versions of do-it- who would like to either (1) receive their refund faster and do not have
yourself tax preparation, professional tax review, tax advice and tax a bank account for the IRS to direct deposit their refund or (2) have
preparation through a tax professional, whereby the client completes their tax preparation fees paid directly out of their refund. A RAC is not
a tax organizer and sends it to a tax professional for preparation a loan and is provided through a contractual relationship with HSBC.
and/or signature. EXPRESS IRAs –Individual retirement accounts (Express IRAs),
By offering professional and do-it-yourself tax preparation options invested in FDIC-insured money market accounts, are offered to
through multiple channels, we can serve our clients in the manner in U.S. clients as a tax-advantaged retirement savings tool. HRBFA acts as
which they choose to be served. custodian on the accounts, with the funds being invested at insured
We also offer clients a number of options for receiving their income depository institutions paying competitive money market interest rates.
tax refund, including a check directly from the Internal Revenue Service TAX RETURN PREPARATION COURSES –We offer income tax return
(IRS), an electronic deposit directly to their bank account, a refund preparation courses to the public, which teach students how to prepare
anticipation check or a RAL. income tax returns and provide us with a source of trained
The following are some of the services we offer with our tax tax professionals.
preparation service: SOFTWARE PRODUCTS –We develop and market TaxCut income tax
PEACE OF MIND GUARANTEE –The POM guarantee is offered to preparation software, Kiplinger’s Home and Business Attorney and
U.S. clients, whereby we (1) represent our clients if audited by the IRS, Kiplinger’s WILLPower
SM
software products.
and (2) assume the cost, subject to certain limits, of additional taxes TaxCut offers a simple step-by-step tax preparation interview, data
owed by a client resulting from errors attributable to one of our tax imports from money management software and tax preparation
professionals’ work. The POM program has a per client cumulative limit software, calculations, completion of the appropriate tax forms,
of $5,000 in additional taxes assessed with respect to the federal, state checking for errors and, for an additional charge, electronic filing.
and local tax returns we prepared for the taxable year covered by ONLINE TAX PREPARATION –We offer a comprehensive range of tax
the program. services and products, from tax advice to complete professional and
do-it-yourself tax return preparation and electronic filing, through our
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H&R BLOCK 2006 Form 10K