The Tax Prep Market is going to H&R Block

In the next year, look for H&R Block (HRB)to pulverize its competition for retail tax prep.  Fundamental changes, going on this week, will impact the tax prep marketplace.  It will be one of those disruptive events that should make winners  out of Block, and losers out of Liberty Tax Service and Jackson Hewitt.

The unknown is how JP Morgan will respond.  They are already in the RAL business with a lot of the independents.  Even so, tax season is about two months off.  Can they come to terms with Jackson Hewitt and Liberty Tax?  Can they reach an agreement in time for this year’s tax season?

How RALs Drive Tax Prep Services

The tax prep chains draw in customers based on two things: the quality of their tax prep service, and the availability of advances on expected tax refunds.   In today’s market, tax prepares must provide loans, or really 9 day advances – on tax refunds.  For the kind of consumers that flock to strip-mall tax places, that refund is the payola of the year.  It can often be as much as $2,000 for a family making approximately $40,000 per year.

Refund anticipation loans are a sizeable chunk of income for tax prep chains.  The chains take about 10 percent of the (more…)