HR Block 2014 Annual Report Download - page 12

42014 Form 10-K | H&R Block, Inc.
under the Cash Back® program in fiscal year 2014 was 583 thousand, compared to 620 thousand in 2013 and 724
thousand in 2012.
SEASONALITY OF BUSINESS – Because most of our clients file their tax returns during the period from February
through April of each year, substantially all of our revenues from income tax return preparation and related services
and products are earned during this period. As a result, we generally operate at a loss through a majority of the fiscal
year.
HRB Bank's operating results are subject to seasonal fluctuations primarily related to the offering of the H&R Block
Prepaid Emerald MasterCard®, EAs and RACs, and therefore peak in February and taper off through the remainder of
the tax season.
COMPETITIVE CONDITIONS – We provide both assisted and DIY tax preparation services and products and face
substantial competition in and across each category. There are a substantial number of tax return preparation firms
and accounting firms offering tax return preparation services, and we face significant competition from independent
tax preparers and certified public accountants. Many tax return preparation firms are involved in providing electronic
filing services and refund transfers or similar services to the public. Commercial tax return preparers are highly
competitive with regard to price and service, and many firms offer services that may include preparation of tax returns
at no charge. Our assisted tax preparation business also faces competition from firms offering DIY tax preparation
services and products. In terms of the number of offices and personal tax returns prepared and electronically filed in
offices, online and via our software, we are one of the largest single providers of tax return preparation solutions and
electronic filing services in the U.S. We also believe we operate the largest tax return preparation businesses in Canada
and Australia.
Our DIY tax preparation options include various forms of digital electronic assistance, including online, mobile and
desktop software. Many other companies offer digital and online tax preparation services, including Intuit, Inc., our
largest competitor offering such services. Like all tax return preparation services and products, price and marketing
competition for digital tax preparation services is intense among value and premium products and many firms offer
digital services and products at no charge. Our digital DIY tax solutions services and products also compete with in-
office tax preparation services. U.S. federal and certain state and foreign taxing authorities also currently offer, or
facilitate the offering of, tax return preparation and filing options to taxpayers at no charge.
HRB Bank provides banking services primarily to our assisted and DIY tax clients and for many of these clients, HRB
Bank is their only provider of banking services. HRB Bank does not seek to compete broadly with regional or national
retail banks.
GOVERNMENT REGULATION – TAX PREPARERS – Our tax preparation business is subject to various forms of
government regulation, including the following:
U.S. Federal Tax Preparer Regulations. U.S. federal legislation requires income tax return preparers to, among
other things, set forth their signatures and identification numbers, including their Preparer Tax Identification Number
(PTIN), on all tax returns prepared by them and retain all tax returns prepared by them for three years. U.S. federal
laws also subject income tax return preparers to accuracy-related penalties in connection with the preparation of
income tax returns. Preparers may be prohibited from continuing to act as income tax return preparers if they
continuously and repeatedly engage in specified misconduct.
The U.S. federal government regulates the electronic filing of income tax returns in part by requiring electronic
filers to comply with all publications and notices of the IRS applicable to electronic filing. We are required to provide
certain electronic filing information to taxpayers and comply with advertising standards for electronic filers. We are
also subject to possible monitoring by the IRS, and if deemed appropriate, the IRS could impose various penalties,
including penalties for improper disclosure or use of taxpayer information, other preparer penalties or suspension
from the IRS electronic filing program.
IRS regulations require all tax return preparers to use a PTIN as their identifying number on U.S. federal tax returns
filed after December 31, 2010. On January 18, 2013, the Federal District Court for the District of Columbia enjoined
the IRS from enforcing the regulations requiring paid tax return preparers to be authorized to practice before the IRS
as a prerequisite to obtaining or renewing a PTIN. Under the enjoined regulations, the IRS would have been permitted
to conduct tax compliance checks on tax return preparers, define the individuals who are considered "tax return