Tag: H&R Block

Accounting News Roundup: Herz Departure Is a Gift for Banks; American Apparel Blames Deloitte for Late Filings; Your Commute Isn’t That Bad | 08.25.10

Herz Leaving Marks Boon for Banks [WSJ]
“A new front has opened up in the war over mark-to-market accounting. Suddenly banks find themselves with an unexpected advantage in the fight over how they should value their vast holdings of financial instruments.

Trprise announcement Tuesday of the departure of Robert Herz as chairman of the Financial Accounting Standards Board. This will give banks an opportunity to push for a successor who is more friendly to their views on the mark-to-market question, as well as the overall idea that accounting should be for more than just investors.”

Former Chief Accounting Officer for Beazer Homes USA, Inc. Indicted on 11 Criminal Counts [FBI]
Michael Rand didn’t have a very good day yesterday.

Block ramped up federal lobbying efforts in second quarter, report says [AP]
H&RB lobbied their asses off from April to June spending $500k talking the ears off at the IRS, Treasury and SEC.

American Apparel Works To File Late 10-Q Before Nov 15 [Dow Jones]
The NYSE has put Dov & Co. on notice that they best get their act together if they don’t want to be sent slumming with the pink sheets. The company is promising to pull things together and if it weren’t for Deloitte quitting, everything would be a-okay.

Fact Checking Minority Leader Boehner’s Claims on “Small Business” and the “Bush” Tax Cuts [Tax Foundation]
In case you didn’t hear, John Boehner suggested that the President fire his entire economic team. Boehner is of the opinion that letting the tax cuts expire will hurt small businesses, citing the Joint Tax Committee. Tax Foundation takes exception with this, saying that the Ohio Congressman and House Minority Leader is misrepresenting the findings of the JTC:

“First off, the businesses that JCT is referring to are not necessarily ‘small.’ Saying the word ‘small business’ sounds good to the electorate because it brings up an image of a mom and pop store on Main Street America. But plenty of large businesses, as defined by net income or gross receipts, file their taxes under the individual income tax as opposed to the corporate income tax. Merely because a business is paying individual income taxes as opposed to corporate taxes does not mean it is ‘small.’ “


Statement From Chairman Schapiro on Financial Accounting Foundation Developments [SEC]
“I commend the Financial Accounting Foundation for its ongoing efforts to evaluate and improve the effectiveness and efficiency of the structure and operation of the Financial Accounting Standards Board by increasing the size of the Board. The Foundation has determined that this revised structure will facilitate the continuing efforts of the FASB to work with the International Accounting Standards Board on their important convergence work plan. In addition, this should enhance the ability of the FASB to address issues facing the U.S. capital markets and the needs of investors.

“I also would like to commend FASB Chairman Robert Herz for his more than eight years of service. During his tenure, Chairman Herz has served as an effective investor advocate to improve the quality of financial reporting standards around the world. I welcome the appointment of Leslie Seidman as Acting Chairman. During this interim period, I look forward to working with Acting Chairman Leslie Seidman and the FASB as they continue their important work.”

Twenty something day-trader nailed with $172M bill in back taxes, asks ‘What’s the IRS?’ [NYDN]
How does a barely surviving Spaniard end up owing over $170 million to the IRS? For starters, he really doesn’t owe the Service the money. The problem arose because he didn’t file a tax return for one year that he spent day trading. The Service concluded that he made $500 million.

China Traffic Jam Could Last Weeks [WSJ]
Today, be thankful for your commute. No matter how bad it was, at least the drive/ride ended.

Accounting News Roundup: Signs That You Should Quit Your Job; District Court Issues Order in Wesley Snipes Tax Case; LarsonAllen Moves Into the Northwest | 08.06.10

BP Completes Cementing Macondo Oil Well From Top [Bloomberg]
“BP Plc completed a cement plug at the top of its Macondo well in the Gulf of Mexico, sealing off the source of millions of gallons of oil spewed into the sea after a drilling rig exploded in April.

The procedure completes the so-called t stage for BP is to finish a relief well to inject cement at the bottom and ensure there’s no leakage inside the 13,000-foot-long (3,962 meters) well bore beneath the seabed, National Incident Commander Thad Allen said yesterday.”

Ten Signs It’s Time to Leave Your Job: The Finance Edition [FINS]
Check yourself for some of these symptoms: “You’ve been holding back from voicing your grievances.”; “You have no clue where the company is headed.”; “You start to believe you can’t do better.”

And that’s just in the first five listed.

Altus completes PricewaterhouseCoopers deal [Bloomberg BusinessWeek]
PwC sells their real estate appraisal management for, what we can only assume to be, a decent chunk of change.

H&R, Jackson Hewitt shares fall on new IRS rule [Reuters]
“Shares of top two U.S. tax preparers H&R Block Inc (HRB.N) and Jackson Hewitt Tax Service Inc (JTX.N) fell Thursday on the Internal Revenue Service’s decision to eliminate debt indicator for tax-refund loans.

On Thursday, the IRS said starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with ‘debt indicator,’ which is used to facilitate refund anticipation loans (RALs).”


PKF Pacific Hawaii completes purchase of Grant Thornton Honolulu office [Pacific Business News]
Name goes official on Monday. Here’s our original report from back in May.

Two UHY LLP Partners Recently Named to Prominent Standard-Setting Implementation Groups [Market Wire]
“The national CPA firm of UHY LLP announced today the recent appointment of Houston-based partner Ana Denena to the International Accounting Standards Board’s (IASB) Small and Medium-sized Entities Implementation Group. In a separate appointment, the firm announced that Maryland-based partner Jennine Anderson was named to the Financial Accounting Standards Board’s (FASB) resource group on non-profit entities.”

PCAOB Adopts New Risk Assess. Stds; Issues Release on Failure to Supervise [FEI Financial Reporting Blog]
As we mentioned yesterday, the PCAOB has been busy. Francine McKenna guest-blogged over at FEI and gives the rundown.

Fannie Quarterly Loss Is Smallest Since 2007 [WSJ]
FTW? “Fannie Mae posted a $1.2 billion net loss for the second quarter, the smallest loss in three years, amid signs that the massive wave of souring loans that brought down the mortgage-finance giant may be easing. But Fannie still asked the U.S. government for an additional $1.5 billion.”

District Court Issues Order in Snipes Case [TaxProf Blog]
Just when you thought it was over.

If you’re not getting cloud computing you’re a loser [AccMan]
That is, you’ve got almost nothing to lose by going for it.

Midwest accounting firm buying LeMaster Daniels [Spokesman-Review]
LarsonAllen brings its business to the northwest by purchasing Spokane-based LeMaster Daniels.

Deloitte leadership race reduced to two hopefuls [Accountancy Age]
“he contest to replace John Connolly as leader of Deloitte in the UK will involve just two members of the firm’s board.

The contenders vieing for the top job are Martin Eadon, head of audit, and David Sproul, head of tax. Sproul joined Deloitte when the firm acquired Andersen in the UK on the back of the Enron crisis

Both candidates gave presentations at the firm’s partner conference on 6 July but no further campaigning is expected.”

Accounting News Roundup: Liberty Tax CEO Hints at Combination with H&R Block; Former NABA President Killed in Skydiving Accident; Sam Antar Has a Question | 07.20.10

Liberty Tax CEO Floats Combining With H&R Block [AP]
John Hewitt, CEO of Liberty Tax, is hinting that maybe he’d like to merge with H&RB, “John Hewitt, founder and CEO of Liberty Tax Service, said Monday he is trying to contact departing board member Thomas Bloch to discuss the potential for combining his privately held company with Kansas City, Mo.-based H&R Block.

‘With my leadership and the name and backing of the Bloch family, we could put a great company going back in the right direction,’ said Hewitt.”

We didn’t say it was a subtle hint.

SEC May Add 800 New Positions as Part Of Reform [Reuters]
At least try to keep the porn enthusiasts out, “The top U.S. securities regulator will need to add about 800 new positions to carry out its part of the massive financial reform legislation, the head of the agency said in testimony to be delivered on Tuesday.

Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said the agency is still crunching the numbers on costs and hiring, and expects the upcoming rulewriting task to be ‘logistically challenging and extremely labor intensive.'”

Two 70-somethings, Theodore Wilson and George Flynn, killed after mid-air skydiving collision [NYDN]
Messrs Wilson and Mr Flynn were both experienced jumpers and were having textbook jumps until something went wrong with approximately 100 feet to go. Mr Wilson was born and raised in the Bronx and he was a former president of the National Association of Black Accountants.

Job Hunting Is Often One Step Forward, Two Steps Back [FINS]
A recent study from the University of Minnesota suggests that people on the hunt for a new job are their own worst enemies, “The results won’t be news to anyone who has ever returned from a jog and mauled a chocolate cake or followed up a productive hour of work with some heavy Facebooking.”

In other words, if someone has a good interview, they’re likely to return home and vedge for the rest of the day, feeling good about their prospects, when the best thing would do is to land the next interview with another prospect.


BP Weighs New Way to Kill Gulf Well [WSJ]
“Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.

Meanwhile, a federal panel investigating the disaster heard that the Deepwater Horizon drilling rig suffered a series of power outages and seized-up computers in the months before it exploded.

BP’s new containment cap has stopped the flow of oil since Thursday, but with the well now sealed at the top, government officials are worried that oil and gas could now be escaping elsewhere.”

Facebook Claimant Must Answer `Where Have You Been?’ to Succeed [Bloomberg]
“Paul Ceglia, the western New York man who says a 2003 contract with Facebook Inc. founder Mark Zuckerberg entitles him to 84 percent of the company, will have to answer a critical question to pursue his claim, lawyers said.

‘The first thing that comes to mind is, where have you been all this time?’ asked Los Angeles litigator Bryan Freedman, who isn’t involved in the case.”

Answer: Been busy on Facebook.

Nokia Conducting Search for New CEO [WSJ]
Get your résumé in now.

I Have A Question [White Collar Fraud]
If Sam Antar is asking a question, something usually stinks. This time he’s wondering if someone had the NBTY Directors jumped the gun on some stock purchases prior the company’s purchase by the Carlyle Group, “If [CNBC’s David] Faber’s reporting is correct, does ‘early May’ mean before or after Michael Ashner and Peter White bought their NBTY shares?”

Accounting News Roundup: Quasi-Exodus at H&R Block?; National Taxpayer Advocate Issues Report That Congress Won’t Read; SEC Might Want to Take a Closer Look at Amedisys | 07.08.10

H&R Block names Alan Bennett as CEO [AP]
This all came about since Russ Smyth resigned, made official by a two sentence 8-K filing, “On June 30, 2010, Russell P. Smyth provided H&R Block, Inc. (the “Company”) with notice of his resignation as President and Chief Executive Officer of the Company, and as a director of the Company. The effective date of Mr. Smyth’s resignation from these positions is August 29, 2010, unless the Board of Directors selects an earlier date.”

It seems like there’s a quasi-exodus in the C-Suite at HRB as General Counsned on Friday and the company is still on the hunt for a CFO after Becky Shulman left in April.

Yahoo CFO Aims to End Buy-High, Sell-Low Record on Deals [Bloomberg]
Tim Morse told Bloomberg that the company has been doing things completely bassackwards, “You’ve seen our track record on M&A with buying really high and selling pretty low,” Morse said in an interview. “We’ve got to be careful.”

Some examples of doing things exactly wrong include, “Yahoo, the second-biggest U.S. search engine, agreed to sell its HotJobs website for $225 million in February after paying about $436 million for it in 2002. In January, Yahoo sold Zimbra, an e-mail and collaboration unit, netting $100 million. Yahoo bought it in 2007 for $350 million.”

Auditors could face grillings from analysts [Accountancy Age]
“Steve Maslin, chair of the partnership oversight board at Grant Thornton, envisages an expanded audit role which may involve greater face-to-face time with stakeholders, including question and answer sessions at annual general meetings.

‘Many investors believe there is valuable information that gets discussed by the auditors with management and audit committees to which investors do not have access – and I think they are right,’ he said.”


Legg Mason CFO resigns [Baltimore Sun]
Get your resumé in now.

FEI Announces 2010 Hall of Fame Inductees [FEI Financial Reporting Blog]
Come on down! “FEI’s 2010 Hall of Fame inductees: Karl M. von der Heyden, former Vice Chairman of the Board of Directors and Chief Financial Officer of PepsiCo, Inc., and Ulyesse J. LeGrange, retired Senior Vice President and Chief Financial Officer of ExxonMobil Corporation’s U.S. Oil and Gas Operations.”

National Taxpayer Advocate Submits Mid-Year Report to Congress [IRS]
Nina Olson’s mid-year report to Congress has plenty to wade through so that means none of the members will likely read it. Fortunately the IRS narrowed the three biggies (Taxpayer Services, New Business and Tax-Exempt Organization Reporting Requirements, IRS Collection Practices) into a much more consumable version.

Open Letter to the [SEC]: Investigate Troubling Issues at Amedisys Missed by Wall Street Journal [White Collar Fraud]
In Sam Antar’s latest WTFU letter to the SEC, he details some issues at Amedisys which weren’t covered in the Journal‘s report from back in April. Since we are into the whole brevity thing, we won’t get into the number crunching here but things look fishy. Plus there’s this:

On September 3, 2009, Amedisys President and COO Larry Graham and Alice Ann Schwartz, its chief information officer, suddenly resigned from the company. Amedisys provided no reason for their resignations and simply said that the two execs “are leaving the company to pursue other interests.”

In my experience, sudden, unexpected executive departures are often a sign of problems beneath the surface. And while it could be entirely coincidental, the trends at Amedisys appear to be consistent with my experience.

But Sam doesn’t believe in coincidences.

RSM McGladrey Can Explain the Disappointing Year

H&R Block announced its earnings for fiscal 2010 yesterday which included the details for the fka RSM McGladrey. The company’s press release basically says that times are tough but RSM had some good reasons for that.


For starters, the small tiff with M&P sort of put a damper on things and a nasty goodwill write-off:

RSM McGladrey reported fiscal 2010 pretax income of $58.7 million, down nearly 39 percent from $96.1 million in the prior year. Revenues declined 4.2 percent to $860.3 million, primarily due to the impact of the overall weak economic environment, which continues to pressure billable rates and hours within the industry. Profitability was negatively impacted by costs associated with previously resolved arbitration proceedings involving McGladrey & Pullen and other costs of litigation totaling $14.5 million in the aggregate, as well as a $15.0 million goodwill impairment charge at our capital markets business unit.

A 39% drop in profits could explain the nationwide layoffs at McGladrey that we reported on earlier this month. It’s a good thing they didn’t have the ginormous golf cake in this year’s numbers, otherwise the results would have been worse.

But if you ignore all that, things were essentially flat and everyone knows that flat is the new up!

Excluding these charges, pretax income would have been approximately $88 million and pretax margin for the segment would have been 10.3 percent, essentially flat with the prior year. The shortfall in revenues was partially mitigated by cost reduction efforts throughout the year. These efforts included headcount reductions to reflect lower client demand, as well as other non-client facing cost reduction initiatives.

OH! There’s the layoffs and they’re citing “lower client demand.” Thoughts on that, anyone?

H&R Block Reports Fiscal 2010 Financial Results [Market Wire]

Layoff Watch ’10: H&R Block Cutting 400 Positions, Closing 400 Locations

Has the risk of violence become too much?

No, it’s actually quite a bit more boring than that – cost savings. The company states that it will decrease its operating expenses $140-$150 million by 2012. CEO Russ Smyth was quoted in the Kansas City Star that “There aren’t as many people who need their taxes done when there are a lot fewer W-2s going out,” referring to the higher unemployment rate in the company’s customer base.

HRB’s headquarters in Kansas City will cut 165 of the 400 jobs lost.


The timing of this announcement is interesting because we’ve heard a few rumors (but virtually no details) about layoffs at RSM McGladrey, an HRB subsidiary, but they aren’t as forthcoming with the press releases and aren’t returning our calls. If you have any details about layoffs at RSM or its on-again off-again affiliate, McGladrey & Pullen, get in touch with us.

Full HRB press release:

KANSAS CITY, Mo. – H&R Block (NYSE:HRB) today announced a broad strategic realignment of its field and corporate support organization. Overall, the company expects these changes to decrease annual operating expenses by $140 – $150 million per year by the end of fiscal year 2012.

Russ Smyth, president and chief executive officer of H&R Block, said, “We operate in a challenging and competitive environment, and to be successful we must find new ways to provide better value to our clients. This requires that we narrow our focus and invest in a few key initiatives that will have the greatest impact on attracting and retaining clients in our retail and digital channels, while eliminating other activities and their related costs.”

Approximately 400 positions are being eliminated throughout the organization as part of the measure. The company also has closed approximately 400 under-performing tax offices out of its network of 11,000 retail tax locations.

“Changes like these are never easy and we appreciate the hard work and loyalty of the affected associates,” Smyth said.

“However, these steps are necessary to improve our business performance and better serve our clients.”

H&R Block expects to incur a pre-tax charge for severance-related costs of approximately $28 million, most of which will be incurred in the fiscal quarter ending July 31, 2010.

Just to Be on the Safe Side, the Dayton, Ohio H&R Block Should Be Prepared for More Trouble

If you figure one H&R Block employee was nearly gunned down because they were being audited, God knows what an indictment would mean for the safety of their employees:

A federal grand jury has indicted West Carrollton club owner and Brookville resident Stanley W. Combs III on the charges of one count of operating an illegal gambling business and four counts of making false statements on federal income tax returns…

…The indictment alleges Combs substantially under-reported the income he received as the owner and operator of Fraternal Order of Orioles, Nest 293 at 842 Watertower Lane in West Carrollton and a related entity at 10955 Lower Valley Pike in Medway, Ohio.

There’s no indication that an H&R Block employee advised this particular alleged tax dodger but better to be prepared.

Related: Did anyone tell these crazies in Ohio that they can get help FOR FREE tomorrow? For crissakes, there’s even one in Dayton at 200 W. Second St. Pull yourself together Buckeye State.

Club owner indicted for illegal gambling, income tax fraud [Dayton Daily News]

Today in Tax-Related Violence: Man Shoots at H&R Block Employee for a Mistake on His Tax Return

It’s been far too long since we’ve heard about violent and/or completely irrational behavior as it relates to taxes, hasn’t it?

Thank God for Ohio, where bulldozers are commonly used to show disdain for pretty much anything. This time it’s firearms.

Police said a man opened fire on a woman after she apparently made a mistake on his taxes. Officers said the man threatened to get revenge on the H & R Block employee because he was audited by the IRS. Dayton police said they [sic] shooter fired several shots into the tax worker’s car. However, she managed to dodge the bullets.

There are lots of things that might conjure up murderous rage but a mistake on a tax return prepared by a H&R Block employee? The good news is that this lunatic is still on the loose somewhere.

Police: Shots Fired At Tax Worker [WHIOTV]

Accounting News Roundup: In Defense of Sherrod Brown; Former H&R Block CFO Gets the Parachute; Intuit Snatches Up Medfusion for $91 Mil | 05.11.10

Sen. Sherrod Brown Prods SEC/FASB to Fix Accounting Standards [The Summa]
This is Professor Albrecht’s take on Senator Brown’s amendment SA 3853 to the S. 3217: Restoring American Financial Stability Act of 2010. The Professor is less concerned about this particular attempt at financial accounting legislation, reasoning that the SEC and the FASB have had plenty of opportunities to fix these issues (e.g. repurchase accounting) and have passed them up.

Given the severity of the problems, and the inability of today’s standard setters to gird their loins and solve the problems, is it appropriate for Congress to pass a law directing the SEC and its standard setter to produce a desired outcome? Absolutely. Accounting standard setting is an inherently political process, as I explained in my popular essay, “Economic Consequences and the Political Nature of Accounting Standard Setting.” Because the SEC has passed on its legislative charge to establish accounting standards that adjudicate between competing economic interests, and because the private standard setters follow their own political agendas when preparing accounting standards, it behooves Congress to step in when things get too far out of whack with national priorities. Such is the case here.

In other words, s— or get off the pot, FASB and SEC. The argument is a fine one, however, if legislation of accounting has to force the FASB’s into action, where does it end? When FAS 157 was being decried as the cause of all our problems, Barney Frank called in Bob Herz, scared the living bejeesus out of him, and got the result he wanted. Is that preferable to this situation? That depends. At the very least, the Sherrod Brown method susceptible to the influences of others while the B. Frank method skips the voting and signing stuff altogether (which has proven tricky in the past).

Former H&R Block CFO gets $620,000 cash in severance [KCBJ]
Becky Shulman (no relation to the Commish, as far as we can tell) is getting $620k for walking away from H&RB along with automatic vesting of 148,725 outstanding stock options. There’s no indication that she is eligible for lifetime complimentary tax prep service.

Intuit to buy Medfusion in $91M deal [SV/SJ Business Journal]
Intuit, owner of QuickBooks, Mint.com, Quicken, etc. has now added Medfusion to its stable, expanding its SaaS holdings. The deal is scheduled to close this July, the 4th Quarter of the company’s fiscal year. CEO Brad Smith, from the press release:

“This transaction expands our software-as-a-service offerings with a solution currently used by more than 30,000 healthcare providers, the vast majority of whom are essentially small businesses. The combination of Medfusion’s industry-leading patient-provider communication solutions and Intuit’s expertise in creating innovative solutions that improve the financial lives of small businesses and consumers, will help us create new solutions that make the clinical, administrative and financial side of healthcare easier for everyone.”

Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10

Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”

The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t sec, as there are too many disparities on treatment of key issues between the two boards.


The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:

“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.

Sam Antar is not amused by this and chimed in with his side of the story:

Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.

As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.

Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”

Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.

JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:

“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…

The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”

Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.

Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.

The Purpose of H&R Block’s Free Shred Day Is Not to Demonstrate How to Destroy Evidence

As you’re all aware, accountants suffer a myriad of stereotypes. The public’s notion that we shred anything and everything with pure, unadulterated joy to cover our asses is due mainly to folks like David Duncan, the Arthur Andersen partner who so famously ordered the shredding at Enron.  That sort of thing inspired this spot for Heineken:


So H&R Block, parent of RSM McGladrey, has decided that it will educate some of the fine residents in Spartanburg, South Carolina about the less dubious purposes of shredding financial information.

In order to increase awareness of the importance of being financially secure, H&R Block is hosting a Shred Day at Cleveland Village, 1564 Asheville Hwy in Spartanburg from 10am – 2pm on Saturday, March 20. The public is invited to attend to safely dispose of sensitive paper materials, learn about how to protect their ID, and find answers to any tax related questions.

We think this is fine idea on the part of H&RB although we foresee one problem. Since South Carolina has gone to great lengths to regulate “subversive organizations”, will this little demonstration of document destruction backfire? Will it allow the terrorists in the Palmetto state to destroy any and all evidence that would otherwise declare their intentions to overthrow the government? Is Glenn Beck aware that this being allowed to happen?

H&R Block Hosts Free Shred Day [Spartanburg News]

The Winners and Losers in the New Tax Preparer Requirements

winners_losers.jpgHaving mastered all of its other responsibilities, the IRS was getting restless. Seeking a new challenge, they are now going to run a testing and continuing education bureaucracy for unenrolled preparers.

When a bureaucracy takes on a new role, the smart question to ask is: who wins?

The big franchised tax preparers are the biggest winners&R Block, Jackson Hewitt and Liberty Tax will now get to put little neon signs saying “IRS Licensed” in their windows. Yes, they will have to take on some responsibility in administering continuing education and employee testing, but they will be able to spread that cost across a nationwide business. They will find ways to streamline things so their employees will miraculously achieve government-approved competence with amazingly little effort. And they will be able to afford fixers and lobbyists to unravel any glitches that happen in the IRS preparer bureau.


This process isn’t just hypothetical. It is just another variation of what happened in the accounting industry after Sarbanes-Oxley and PCAOB. Smaller firms who would take on small public companies before PCAOB could no longer justify the regulatory costs, and the public companies are now captive clients of the big firms.

Over time, the IRS regulatory function will undergo the inevitable process of regulatory capture by the big players. The result – regulations that don’t much bother them but which make life difficult or impossible for their little competitors.

Fixers and lobbyists – See above.

Congresscritters and their staffs – Especially those on tax writing committees. Their new friends Henry, Robert, Jackson and Hewitt will enrich their PACs and make sure that the needs of their new overlords are attended to.

IRS staffers – Once public service palls, the bureaucrats who oversee the programs will have cushy new homes awaiting them at the franchised tax shops.

When there are winners, there are losers. These include:

Small tax prep shops – A solo practitioner will have to manage the new bureaucracy alone, while his giant competitors will have full-time fixers. When a little guy’s competency exam gets lost by the IRS bureaucracy, he might lose a season’s worth of business; fixers and lobbyists will make sure nothing like that happens to the big boys. And of course the inevitable capture of the IRS bureaucracy by the big players will continue to squeeze the little guys.

Enrolled Agents – Now that the IRS will be creating a new lesser level of licensing, these professionals will have a harder time distinguishing their much higher standards to a confused public.

Consumers – The most obvious result will be an increase in prices, both to pay for the new compliance costs and because the rules will run smaller preparers out of the market. Supporters of the regulations will say that it will be worth it because the new standards will improve quality. That’s a pipe dream. A bozo test and a few hours of CPE won’t turn a quack into a brain surgeon.

Low income consumers will, of course, not have to pay for the fancy “licensed” preparers. There will still be plenty of folks with pirated copies of Turbotax preparing unsigned returns in their cars and apartments, and the higher prices of the licensed competitors will send them more business. Other consumers will either struggle through their own returns without benefit of CPE or drop out of the tax system entirely.

So what would be a better approach? – The real problem is Congress. A simple tax law without fraud-inviting refundable credits wouldn’t have preparer problems. At the very least, we should require Congresscritters to face the consequences of their own work. Every one of them should be required to prepare their returns themselves in a live (and archived) webcast. If they use software, their screens should be visible on the webcast. What about their privacy? They make us give them all of our personal information, so fair is fair.

Editor’s note: Joe Kristan is a tax shareholder for Roth & Company, a Des Moines, Iowa CPA firm, where he works with closely-held businesses and their owners. Prior to helping start Roth & Company, he worked for two of what are now the Final Four CPA firms. He writes the Tax Update Blog and is available for seminars, first communions, Bar Mitzvahs, etc. You can see his debut post for GC here.