The three largest tax preparation companies, H&R Block Inc., Jackson Hewitt Tax Services, and Liberty Tax Service, reported preliminary results last week for the period from January 1 through February 28th, with Block reporting a decline in number of returns prepared, and Jackson Hewitt and Liberty reporting increases. The Internal Revenue Service (IRS) also released selected preliminary statistics last week, a sharp increase in returns filed from home computers, up almost 17 percent.
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H&R Block reported a total of 12.1 million returns prepared, representing a decline of .9 percent, 108,000, from the same period last year. The average fee per client, $153.20, rose 6.2 percent over last year.
âAfter a disappointing January, we are meeting our expectations, with February results comparable to those in the prior year in our retail offices and digital tax solutions posting strong double-digit gains,â said Mark A. Ernst, Block's chairman and chief executive officer. âThough do-it-yourself taxpayers are turning to digital solutions, principally online, we don't see this as a shift from traditional paid professionals.â
Jackson Hewitt Tax Service, the second largest tax preparation company in the U.S. with 6,000 franchised and company-owned offices, reported that it had prepared 2.7 million returns, an increase of 11 percent over this period last year. The company estimates an increase in revenue per return in the 7 â 10 percent range. Most Jackson Hewitt offices are independently owned and operated.
Liberty Tax Service reported an increase of 22 percent in the number of returns prepared and said it had experienced a 6 percent increase in price per return, so far. An overall decline in the level of discounting this year, combined with the fee increase, should result in a 19 percent increase in average net fee per return, the company said. Liberty's founder and chief executive, John Hewitt, a veteran of 12 years with H&R Block and a founder of Jackson Hewitt, credited brand recognition and employee dedication for the success of the seven-year-old company. Liberty now boasts 2,000 U.S. and Canadian offices.
Despite the increase in returns filed from home computers, IRS Free File numbers are down from last year, indicating that taxpayers are finding other ways to access tax preparation software. Bert Dumars, Director of Electronic Tax Administration for the IRS, said that the Free File option is âan important e-file option that taxpayers should consider as the April filing deadline approaches.â
As of March 10, 2006, the IRS reported that it had paid a total of $101 billion in refunds, with the average refund, $2,728, compared to $2,633 for 2005.