HR Block 2008 Annual Report Download - page 22

In fiscal year 2008, our discontinued operations reported a pretax loss of $1.2 billion, which includes losses of
$15.0 million from our Business Services discontinued operations, with the remainder from our mortgage
business. See additional discussion of the performance of our mortgage operations in Item 7, under
“Discontinued Operations.”
These businesses are presented as discontinued operations in the consolidated financial statements for all
periods presented.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See discussion below and in Item 8, notes 19 and 20 to our consolidated financial statements.
DESCRIPTION OF BUSINESS
TAX SERVICES
GENERAL – Our Tax Services segment is primarily engaged in providing tax return preparation and related
services and products in the United States and its territories, Canada and Australia. Revenues include fees earned
for services performed at company-owned retail tax offices, royalties from franchise retail tax offices, sales of
Peace of Mind (POM) guarantees, sales of tax preparation and other software, fees from online tax preparation,
participation in refund anticipation loans (RALs) and Emerald Advance lines of credit. Segment revenues
constituted 67.9% of our consolidated revenues from continuing operations for fiscal year 2008, 66.8% for
2007, and 68.5% for 2006.
Retail income tax return preparation and related services are provided by tax professionals via a system of retail
offices operated directly by us or by franchisees. We also offer our services through seasonal offices located inside
major retailers.
We offer a number of digital tax preparation alternatives. TaxCut»from H&R Block enables do-it-yourself users
to prepare their federal and state tax returns easily and accurately. Our software products may be purchased
through third-party retail stores, direct mail or online.
We also offer our clients many online options: multiple versions of do-it-yourself tax preparation; professional
tax review; tax advice; and tax preparation through a tax professional, whereby the client completes a tax
organizer and sends it to a tax professional for preparation and/or signature.
By offering professional and do-it-yourself tax preparation options through multiple channels, we seek to serve
our clients in the manner in which they choose to be served.
We also offer clients a number of options for receiving their income tax refund, including a check directly from
the Internal Revenue Service (IRS), an electronic deposit directly to their bank account, a prepaid debit card, a
refund anticipation check or a RAL.
The following are some of the services we offer in addition to our tax preparation service:
Peace of Mind Guarantee. The POM guarantee is offered to U.S. clients, whereby we (1) represent our clients
if audited by the IRS, and (2) assume the cost, subject to certain limits, of additional taxes owed by a client
resulting from errors attributable to one of our tax professionals’ work. The POM program has a per client
cumulative limit of $5,000 in additional taxes assessed with respect to the federal, state and local tax returns we
prepared for the taxable year covered by the program.
RALs. RALs are offered to our U.S. clients by a designated bank primarily through a contractual relationship
with HSBC Holdings plc (HSBC). An eligible, electronic filing client may apply for a RAL at one of our offices. After
meeting certain eligibility criteria, clients are offered the opportunity to apply for a loan from HSBC in amounts up
to $9,999 based upon their anticipated federal income tax refund. We simultaneously transmit the income tax
return information to the IRS and the lending bank. Within a few days or less after the filing date, the client receives
a check, direct deposit or prepaid debit card in the amount of the loan, less the bank’s transaction fee, our tax
return preparation fee and other fees for client-selected services. Additionally, qualifying electronic filing clients
are eligible to receive their RAL proceeds, less applicable fees, in approximately one hour after electronic filing
using the Instant Money service. A RAL is repaid when the IRS directly deposits the participating client’s federal
income tax refund into a designated account at the lending bank. See related discussion in “Loan Participations”
below.
RACs. Refund Anticipation Checks (RACs) are offered to U.S. clients who would like to either (1) receive their
refund faster and do not have a bank account for the IRS to direct deposit their refund or (2) have their tax
preparation fees paid directly out of their refund. A RAC is not a loan and is provided through a contractual
relationship with HSBC.
Early-Season Loans. Emerald Advance lines of credit are offered to clients from December through early
January, in an amount not to exceed $500. If the borrower performs as agreed in the loan terms, the line of credit
can be increased and utilized year-round. These lines of credit are offered by HRB Bank. In the prior year, Instant
2H&R BLOCK 2008 Form 10K