HR Block 2005 Annual Report Download - page 64

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See discussion below and in Item 8, note 20 to our consolidated financial statements.
DESCRIPTION OF BUSINESS
TAX SERVICES
GENERAL ⬎⬎⬎ Our Tax Services segment is primarily engaged RALs ⬎⬎⬎ RALs are offered to our U.S. clients by a designated
in providing tax return preparation and related services and bank through a contractual relationship with HSBC Holdings plc
products in the United States and its territories, Canada, Australia (‘‘HSBC’’). An eligible, electronic filing client may apply for a RAL
and the United Kingdom. Revenues include fees earned for at one of our offices. After meeting certain eligibility criteria,
services performed at company-owned retail tax offices, royalties clients are offered the opportunity to apply for a loan from HSBC
from franchise retail tax offices, sales of Peace of Mind (‘‘POM’’) in amounts up to $9,999 based upon their anticipated federal
guarantees, sales of tax preparation and other software, fees from income tax refund. We simultaneously transmit the income tax
online tax preparation, and participation in refund anticipation return information to the IRS and the lending bank. Within a few
loans (‘‘RALs’’). Segment revenues constituted 53.4% of our days or less after the filing date, the client receives a check or
consolidated revenues for fiscal year 2005, 51.6% for 2004, and direct deposit in the amount of the loan, less the bank’s
52.2% for 2003. transaction fee, our tax return preparation fee and other fees for
Retail income tax return preparation and related services are client-selected services. Additionally, qualifying electronic filing
provided by tax professionals via a system of retail offices clients are eligible to receive their RAL proceeds, less applicable
operated directly by us or by franchisees. In addition to our retail fees, in approximately one hour after electronic filing using the
offices, we offer a number of digital tax preparation alternatives. Instant Money service. For a RAL to be repaid, the IRS directly
TaxCut˛ from H&R Block enables do-it-yourself users to deposits the participating client’s federal income tax refund into a
prepare their federal and state tax returns easily and accurately. designated account at the lending bank. See related discussion of
Our software products may be purchased through third-party RAL participations below.
retail stores, direct mail or online. RACs ⬎⬎⬎ Refund Anticipation Checks (‘‘RACs’’) are offered
Clients also have many online options: multiple versions of do- to U.S. clients who may not wish to obtain a RAL or do not qualify
it-yourself tax preparation, professional tax review, tax advice for the RAL program, but who would like to either (1) receive
and tax preparation through a tax professional, whereby the their refund faster and do not have a bank account for the IRS to
client completes a tax organizer and sends it to a tax professional direct deposit their refund or (2) have their tax preparation fees
for preparation and/or signature. paid directly out of their refund. A RAC is not a loan and is
By offering professional and do-it-yourself tax preparation provided through a contractual relationship with HSBC.
options through multiple channels, we can serve our clients in the EASY PAY LOANS ⬎⬎⬎ ‘‘EasyPay’’ revolving loans are offered
manner in which they choose to be served. through a contractual relationship with HSBC to clients whose
We also offer clients a number of options for receiving their tax returns reflect a balance due to the IRS. The loan has ‘‘same
income tax refund, including a check directly from the Internal as cash’’ terms for approximately 90 days.
Revenue Service (‘‘IRS’’), an electronic deposit directly to their EXPRESS IRAs ⬎⬎⬎ Individual retirement accounts (‘‘Express
bank account, a refund anticipation check or a RAL. IRAs’’), invested in FDIC-insured money market accounts, are
The following are some of the services we offer with our tax offered to U.S. clients as a tax-advantaged retirement savings
preparation service: tool. HRBFA acts as custodian on the accounts, with the funds
PEACE OF MIND GUARANTEE ⬎⬎⬎ The POM guarantee is being invested at insured depository institutions paying
offered to U.S. clients, whereby we (1) represent our clients if competitive money market interest rates.
audited by the IRS, and (2) assume the cost, subject to certain TAX RETURN PREPARATION COURSES ⬎⬎⬎ We offer income
limits, of additional taxes owed by a client resulting from errors tax return preparation courses to the public, which teach
attributable to one of our tax professionals. The POM program taxpayers how to prepare income tax returns and provide us with
has a per client cumulative limit of $5,000 in additional taxes a source of trained tax professionals.
assessed with respect to the federal, state and local tax returns SOFTWARE PRODUCTS ⬎⬎⬎ We develop and market TaxCut
we prepared for the taxable year covered by the program. income tax preparation software, H&R Block DeductionPro
TM
,
H&R BLOCK 2005 Form 10K
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