H&R Block
Encyclopedia
Tax preparation
Tax preparation is the process of preparing tax returns, often income tax returns, often for a person other than the taxpayer, and generally for compensation. Tax preparation may be done by the taxpayer with or without the help of tax preparation software and online services...
company in the United States, claiming more than 22 million customers worldwide, with offices in Canada, Australia and the United Kingdom. The Kansas City
Kansas City, Missouri
Kansas City, Missouri is the largest city in the U.S. state of Missouri and is the anchor city of the Kansas City Metropolitan Area, the second largest metropolitan area in Missouri. It encompasses in parts of Jackson, Clay, Cass, and Platte counties...
-based company also offers banking, personal finance and business consulting services.
Founded in 1955 by brothers Henry W. Bloch
Henry W. Bloch
Henry Wollman Bloch is the co-founder and the chairman emeritus of H&R Block.Henry and his brother, Richard Bloch, founded H&R Block in 1955 in Kansas City, Missouri.-Personal life:Bloch was born in Kansas City...
and Richard Bloch
Richard Bloch
Richard Adolf Bloch was an American entrepreneur, and philanthropist best known for starting the H&R Block tax preparation and personal finance company with his older brother Henry in 1955...
, Block today operates 12,500 retail tax offices in the United States, plus another 1,400 abroad. Block offers its own consumer tax software called H&R Block at Home (formerly TaxCut), as well as online tax preparation and electronic filing from their website.
History
During World War IIWorld War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, Henry W. Bloch
Henry W. Bloch
Henry Wollman Bloch is the co-founder and the chairman emeritus of H&R Block.Henry and his brother, Richard Bloch, founded H&R Block in 1955 in Kansas City, Missouri.-Personal life:Bloch was born in Kansas City...
was a young Army Air Forces
United States Army Air Forces
The United States Army Air Forces was the military aviation arm of the United States of America during and immediately after World War II, and the direct predecessor of the United States Air Force....
navigator who wanted to start a family business with his brothers in Kansas City. Home from the war in 1946, Henry saw a pamphlet suggesting a bright future for companies serving small businesses, and it fired his imagination. That year, Henry and his older brother, Leon, borrowed $5,000 and opened a small bookkeeping
Bookkeeping
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually...
business on Main Street in downtown Kansas City. However, four months later, they had few clients and Leon decided to seek a law degree
Law degree
A Law degree is an academic degree conferred for studies in law. Such degrees are generally preparation for legal careers; but while their curricula may be reviewed by legal authority, they do not themselves confer a license...
.
Henry wanted to keep trying with the fledgling business and placed a newspaper ad for help-wanted. He got an unexpected response—from his mother—who proposed that Henry hire his younger brother, Richard
Richard Bloch
Richard Adolf Bloch was an American entrepreneur, and philanthropist best known for starting the H&R Block tax preparation and personal finance company with his older brother Henry in 1955...
, for the job. Henry and Richard Bloch jointly ran their United Business Company, which focused on bookkeeping, but also did some income tax work for clients. The brothers found that doing taxes was time-consuming, and they decided to end that type of service. One of their clients, John White, an ad salesman for The Kansas City Star
The Kansas City Star
The Kansas City Star is a McClatchy newspaper based in Kansas City, Missouri, in the United States. Published since 1880, the paper is the recipient of eight Pulitzer Prizes...
newspaper, had a different idea; he suggested the Blochs make tax preparation a separate business and developed an ad announcing $5 tax services. The Blochs were not convinced, but they agreed to run the ad in January 1955. The next day, the brothers had an office full of tax clients, and H&R Block was born.
In 1956, the Blochs decided to expand and picked New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
. The move was profitable, but neither brother wanted to move to New York, so they agreed to sell that regional operation to two local accountants. However, since the would-be buyers could not meet the asking price, the parties agreed the Bloch brothers would get $10,000, plus royalties from the tax operation, creating the first H&R Block franchise
Chain store
Chain stores are retail outlets that share a brand and central management, and usually have standardized business methods and practices. These characteristics also apply to chain restaurants and some service-oriented chain businesses. In retail, dining and many service categories, chain businesses...
tax office. The Bloch brothers chose to spell the name "Block" with a K to ensure the name is not mispronounced "blotch." In the following years, H&R Block grew quickly and went public in 1962, then opened its first tax training school in 1965 to meet the demand for skilled tax professionals at its franchise offices.
A TV ad campaign begun in 1972 featured Henry Bloch and became the springboard for H&R Block becoming one of the most widely recognized brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
names in the U.S. In 1980 H&R Block purchased the Compuserve
CompuServe
CompuServe was the first major commercial online service in the United States. It dominated the field during the 1980s and remained a major player through the mid-1990s, when it was sidelined by the rise of services such as AOL with monthly subscriptions rather than hourly rates...
online service.
By 1986, Block was handling more than 10 million tax returns each year and had opened offices in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
. That year, Block worked with the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
to introduce electronic filing. Since then, Block has moved further into the digital realm with tax software and online tax preparation. Beginning in the 1990s, the company began to expand into the financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
arena, offering mortgage loan
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
s, bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
ing, and business services.
In 2007 Richard C. Breeden
Richard C. Breeden
Richard C. Breeden is a former Chairman of the U.S. Securities and Exchange Commission, hedge fund manager, and corporate chairman.-Early career:Breeden began his career practicing corporate and securities law in New York City...
won a proxy fight
Proxy fight
A proxy fight or proxy battle is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes A proxy...
to become chairman saying the company was under performing and losing market share to Intuit. This created on an ongoing fight with the Bloch family including the resignation of Thomas Bloch saying he was protesting, “the intense pressure from short-term oriented shareholders.” When Breeden, whose firm Breeden Capital Management owned 13.3 million shares at December 31, 2010, resigned in March 2011 it was reported that H&R Block’s return on investment had declined 10 percent on his watch while industry Standard and Poor 500 index had declined 6.8 percent in the same period which includes the Financial crisis (2007–present)
Business areas
Retail tax services
In May 2007, the company said its total U.S. clients served during the 2007 tax season reached a record 19.9 million, up 3.8 percent from the previous year period. H&R Block employs 90,000 tax preparers. The company reported that in 2007, its tax clients obtained US$30 billion in tax refundTax refund
A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the...
s, credits and other government benefits. The company said it filed US$10 billion worth of Earned Income Tax Credit
Earned income tax credit
The United States federal earned income tax credit or earned income credit is a refundable tax credit primarily for individuals and families who have low to moderate earned income. Greater tax credit is given to those who also have qualifying children...
s for its low-income clients.
Digital tax services
H&R Block competes for a share of the digitalDigital
A digital system is a data technology that uses discrete values. By contrast, non-digital systems use a continuous range of values to represent information...
market with its online tax programs and software. Block's other digital offerings include H&R Block Best of Both, where clients enter their information and do their returns online and a Block tax professional reviews, edits, signs and e-files the return; and, Block Online Office, where clients enter their information on a questionnaire, submit it online and a Block preparer works up their tax return and files it. Similarly, TaxOne is a program where outside businesses may contract H&R Block to prepare taxes for their clients. H&R Block provides free digital tax services to low-income families through a web portal called the Beehive.
H&R Block Bank
The H&R Block Bank was chartered in 2006 and offers low-cost services to its low- to moderate-income customers. Block has said that more than one-third of its clients have no banking services, and must pay high check-cashing fees for their paychecks, as well as tax refund checks. Bank customers can establish FDIC-insuredFederal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
accounts with their tax refund money and then access those funds with pre-paid "Emerald" Mastercards through a nationwide network of ATMs. The accounts also allow direct payroll deposits
Direct deposit
Direct deposit also known as Direct credit is a banking term used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee, namely:* In Europe, the giro system...
and clients can get traditional services, such as home mortgage loans, lines of credit
Line of credit
A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...
, and IRAs
Individual Retirement Account
An individual retirement arrangement is the blanket term for a form of retirement plan that provides tax advantages for retirement savings in the United States...
. Block Bank accounts are available only to the company's tax clients in Block offices. The bank is primarily an online operation, with one brick-and-mortar
Brick and mortar
Brick and mortar in its most simplest usage is used to describe the physical presence of a building or other structure...
office located in Kansas City.
Financial advisors
Beginning in 1971, H&R Block Financial Advisors operated as a full-service securities broker-dealer. By 2007 the unit was managing $33 billion in assets, offering investment planning, advice and related financial products and services, and employed 900 financial advisors in the U.S. In 2008, H&R Block sold the unit to Ameriprise FinancialAmeriprise Financial
Ameriprise Financial, Inc. is one of the leading diversified financial services companies in the U.S. Ameriprise Financial engages in business through its...
for US$ 315 million.
RSM McGladrey
RSM McGladrey Business Solutions was created in 1999 when H&R Block acquired the assets and business of McGladrey & Pullen, based in BloomingtonBloomington, Minnesota
Bloomington is the fifth largest city in the U.S. state of Minnesota in Hennepin County. Located on the north bank of the Minnesota River above its confluence with the Mississippi River, Bloomington lies at the heart of the southern...
, Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
. McGladrey has 100 offices in 25 states and offers accounting, consulting, tax services, and international business services to mid-sized companies. Its clients include business in the construction, health care and manufacturing industries. Through an alliance with McGladrey & Pullen and other accountancies, the Block subsidiary operates in 70 countries under the RSM International name. RSM has an alternative practice structure with McGladrey & Pullen.
Products
- H&R Block At Home is a tax preparation software application, formerly called TaxCut, that is available in online and CD versions. It will assist in preparation and filing one's income tax returns with the IRS with the option to e-file and direct depositDirect depositDirect deposit also known as Direct credit is a banking term used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee, namely:* In Europe, the giro system...
an applicable tax refund into a specified bank account.
H&R Block's own taxes
In August 2005, H&R Block announced that it had overstated its earnings for 2003 and 2004 by $91.1 million. The company stated that it had "insufficient resources" to identify and report complex transactions in its corporate tax accounting. On February 23, 2006, the company said in its quarterly results that it had miscalculated its own state income taxes for 2005 and 2004, and that it owed an additional $32 million in back taxes. That mistake, plus Block's lower-than-expected earnings for the quarter, caused its stock price to drop by 8.5 percent in one day. At April 30, 2008, the company's liability recorded for "uncertain tax positions" totaled $137.6 million (excluding related interest and penalties). According to H&R Block, "This liability represents an estimate of tax positions we have taken in our tax returns that may ultimately not be sustained upon examination by the tax authorities." Estimated gross interest and penalties relating to these potential assessments totaled an additional $47.5 millionRefund anticipation loans
On Feb. 15, 2006, California Attorney General Bill LockyerBill Lockyer
William Westwood "Bill" Lockyer is an American politician. He is the current 32nd State Treasurer of California, elected in 2006 and re-elected in 2010. He has also served as California Attorney General and President Pro Tempore of the California State Senate...
sued H&R Block, alleging the company's refund anticipation loan (RAL) business violated state and federal laws in its marketing and providing of high-cost RALs mainly to low-income clients. Block responded that it "believes the refund lending program is both fair and legal, and will vigorously defend against the complaint". On January 2, 2009, California Attorney General Edmund G. Brown Jr. reached a $4.85 million settlement with H&R Block, which prohibits the company from deceptively marketing high-cost refund anticipation loans as early "tax refunds". Consumers will receive up to $2.45 million in restitution if they purchased a "Refund Anticipation Loan" or a "Refund Anticipation Check" through H&R Block between January 1, 2001 and December 31, 2008. In addition, H&R Block will pay $500,000 in penalties and $1.9 million in fees and costs.
Express IRA
On March 16, 2006, New York Attorney General Eliot SpitzerEliot Spitzer
Eliot Laurence Spitzer is an American lawyer, former Democratic Party politician, and political commentator. He was the co-host of In the Arena, a talk-show and punditry forum broadcast on CNN until CNN cancelled his show in July of 2011...
sued H&R Block, accusing the company of deceptive marketing of its Express IRA retirement accounts. The lawsuit alleged the company assessed fees, including set-up fees, annual fees, and account closing fees that, for 85% of account holders resulted in the account losing money. However, in July 2007, a New York state judge dismissed much of the lawsuit. Justice Karla Moskowitz of the State Supreme Court excused Block and five of its units from the lawsuit. She let stand the portion of the complaint concerning another unit, H&R Block Financial Advisers, but dismissed allegations of common law fraud. At the time of the ruling, Block said it believed the remaining assertions lacked merit and that it would appeal. On January 6, 2009, a New York state appeals court overruled trial justice Karla Moskowitz's July 2007 ruling and reinstated the lawsuit against H&R Block Inc that accused the company of fraudulently marketing Express IRA retirement accounts to hundreds of thousands of lower-income clients nationwide.
Social Security numbers
In December 2005, H&R Block sent its customers free copies of its TaxCut software, but the mailing labels on the packages mistakenly included the recipients' Social Security numbers. Block said it sent the promotional mailing to former customers and people whose names were taken from purchased lists. The company said it is legally required to hold on to customers' tax information, including Social Security numbers, for three years. Block said no customer data has been lost or stolen as a result of the mistake, and that less than 3 percent of the mailings were involved.H&R Block in Popular Culture
- Hank HillHank HillHenry Rutherford "Hank" Hill Age 50 animated series King of the Hill. Hank lives in Arlen, Texas and works at the fictional Strickland Propane selling propane and propane accessories. Hank's voice is provided by series creator Mike Judge. The Economist named Hank Hill as one of the wisest people...
from the animated television show King of the HillKing of the HillKing of the Hill is an American animated dramedy series created by Mike Judge and Greg Daniels, that ran from January 12, 1997, to May 6, 2010, on Fox network. It centers on the Hills, a working-class Methodist family in the fictional small town of Arlen, Texas...
references "the people" over at H&R Block on several occasions, suggesting that the firm handles the family's finances. (At one point, H&R Block's sloganAdvertising sloganAdvertising slogans are short, often memorable phrases used in advertising campaigns. They are claimed to be the most effective means of drawing attention to one or more aspects of a product. A strapline is a British term used as a secondary sentence attached to a brand name...
was "You got people.") - Michael ScottMichael ScottMichael Scott, Michael Scot, or Mike Scott may refer to:* Michael Scott , former regional manager of Dunder Mifflin Scranton in the U.S. TV series The Office-Academics:...
from the television show The Office stated "H&R Block, what do they even do?" at a job fair.