Delayed tax season, end of free 1040EZ promotion cut into H&R Block’s work

A late start to the tax season and H&R Block’s decision to drop its free federal 1040EZ promotion combined to cut its early tax return work by 6 percent, the Kansas City-based company said Thursday.

The Internal Revenue Service delayed accepting tax filings electronically this year because of the temporary federal shutdown last fall when it was preparing for this year’s tax filing season.

Through the end of February, H&R Block had prepared 11.7 million returns, compared with 12.5 million returns at the same time last year. The decline was sharper among its H&R Block stores, off 9.1 percent, than its digital services, down 0.6 percent.

H&R Block said the 6 percent overall drop in returns through Feb. 28 had more of an impact on its earnings than on its revenues. Many represented previously free 1040EZ filings a year ago that generated no revenues but added to costs.

Some of those filers ended up paying H&R Block for services this year that they would have received for free a year ago.

In a conference call with analysts, chief executive Bill Cobb said most of the decline in assisted tax returns came from dropping the 1040EZ promotion.

This winter’s severe weather also cut into business, but neither snow nor the delay to the season will affect Block’s financial results for the entire year, Cobb told analysts.

“The great thing about our business is you have to come file,” Cobb said. “We’re really focused on the big finish here.”

The IRS delay, however, affected the company’s third-quarter results, which covered its operations through the end of January and were reported Thursday. Although it had prepared many customers’ tax returns in January, it couldn’t file them with the IRS until late in the month. Block doesn’t count the revenues from customers until their returns are filed.

H&R Block said the delay meant $277 million in revenue expected in the recently ended quarter was pushed into its next financial reporting period at the end of April.

Revenue in the third quarter fell 58 percent to $200 million. The company said it lost $214.7 million, or 78 cents a share, compared with a loss of $17.7 million, or 7 cents a share, a year ago. It normally loses money in its third quarter.

This story was originally published March 6, 2014 at 3:49 PM with the headline "Delayed tax season, end of free 1040EZ promotion cut into H&R Block’s work."