HR Block 2007 Annual Report Download - page 31

of our offices. After meeting certain eligibility criteria, clients are During fiscal year 2007, we acquired TaxWorks LLC and its affiliated
offered the opportunity to apply for a loan from HSBC in amounts up to entities, a provider of commercial tax preparation software targeting the
$9,999 based upon their anticipated federal income tax refund. Weindependent tax preparer market. The primary software product,
simultaneously transmit the income tax return information to the IRS TaxWorks˛, is designed for small to mid-sized CPA firms that file taxes
and the lending bank. Within a few days or less after the filing date, the for individuals and businesses. The initial cash purchase price was
client receives a check or direct deposit in the amount of the loan, less $24.8 million, with a payment of $10.0 million due in May 2007 and a
the bank’s transaction fee, our tax return preparation fee and other fees payment of $23.6 million due in May 2012. The $10.0 million payment
for client-selected services. Additionally, qualifying electronic filing due in May 2007 was paid on April 30, 2007. See Item 8, note 2 to our
clients are eligible to receive their RAL proceeds, less applicable fees, in consolidated financial statements.
approximately one hour after electronic filing using the Instant Money ONLINE TAX PREPARATION –We offer a comprehensive range of tax
service. For a RAL to be repaid, the IRS directly deposits the services, from tax advice to complete professional and do-it-yourself tax
participating client’s federal income tax refund into a designated return preparation and electronic filing, through our websites at
account at the lending bank. See related discussion in ‘‘Loan www.hrblock.com, www.taxcut.com, www.taxnet.com and
Participations’’ below. www.taxengine.com. These websites allow clients to prepare their
RACs –Refund Anticipation Checks (RACs) are offered to U.S. clients federal and state income tax returns using the TaxCut Online Tax
who would like to either (1) receive their refund faster and do not have Program and other platforms, access tax tips, advice and tax-related
a bank account for the IRS to direct deposit their refund or (2) have news and use calculators for tax planning.
their tax preparation fees paid directly out of their refund. A RAC is not We participate in the Free File Alliance (FFA). This alliance was
a loan and is provided through a contractual relationship with HSBC. created by the tax return preparation industry and the IRS, and allows
IMALs –IMALs are early-season loans offered to U.S. clients, qualified filers with adjusted gross incomes less than $52,000 to prepare
beginning in November 2006, allowing them to take out a loan from and file their federal return online at no charge. We feel that this
HSBC in amounts up to $2,500 based upon their anticipated federal program provides a valuable public service and increases our visibility
income tax refund. See related discussion in ‘‘Loan Participations’’ with new clients, while also providing an opportunity to offer our state
below. return preparation services to these new clients at our regular prices.
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H&R BLOCK PREPAID EMERALD MASTERCARD –The H&R Block CASHBACK PROGRAM –We offer a refund discount (CashBack)
Prepaid Emerald MasterCard˛allows a client to receive a tax refund program to our customers in Canada. Canadian law specifies the
from the IRS directly on a prepaid debit card, or to direct RAL or RAC procedures we must follow in conducting the program. In accordance
proceeds to the card to avoid high-cost check-cashing fees. The card with current Canadian regulations, if a customer’s tax return indicates
can be used for everyday purchases, bill payments, and ATM the customer is entitled to a tax refund, we issue a check to the client.
withdrawals anywhere MasterCard˛is accepted. Additional funds can The client assigns to us the full amount of the tax refund to be issued by
be added to the card account year-round though direct deposit, or at the Canada Revenue Agency (CRA) and the refund check is then sent by
participating retail locations. the CRA directly to us. In accordance with the law, the discount is
EASY SAVINGS, EASY IRA –Traditional savings and individual deemed to include both the tax return preparation fee and the fee for
retirement accounts insured by the Federal Deposit Insurance tax refund discounting. This program is financed by short-term
Corporation (FDIC) are offered to U.S. clients as savings and tax- borrowings. The number of returns discounted under the CashBack
advantaged retirement savings tools. The accounts are held at HRB program in fiscal year 2007 was approximately 670,000, compared to
Bank. 653,000 in 2006 and 581,000 in 2005.
TAXRETURN PREPARATION COURSES –We offer income tax return CLIENTS SERVED –We, together with our franchisees, served
preparation courses to the public, which teach students how to prepare approximately 22.9 million clients worldwide during fiscal year 2007, up
income tax returns and provide us with a source of trained tax from 21.9 million in 2006 and 21.4 million in 2005. See discussion of the
professionals. Canadian tax season extension under ‘‘Seasonality of Business.’’ We
SOFTWARE PRODUCTS –We develop and market TaxCut˛income served 20.3 million clients in the U.S. during fiscal year 2007, up from
tax preparation software, Kiplinger’s Home and Business Attorney and 19.5 million in 2006 and 19.1 million in 2005. ‘‘Clients served’’ includes
Kiplinger’s WILLPower
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software products. taxpayers for whom we prepared income tax returns in offices, federal
TaxCut˛offers a simple step-by-step tax preparation interview, data software units sold, online completed and paid federal returns, paid
imports from money management software and tax preparation state returns when no federal return was purchased, taxpayers for
software, calculations, completion of the appropriate tax forms, whom we provided only paid electronic filing services and clients who
checking for errors and, for an additional charge, electronic filing. received IMALs but did not return for tax preparation and/or e-filing
H&R BLOCK 2007 Form 10K