Chopping off the old Block
Recently, a former colleague whom I had worked with during an overlong apprenticeship at a local daily newspaper announced that he was taking on a second career after nearly a quarter century of toiling in some form of media or another. After whining for years how much he was paying
his accountant to prepare his taxes and pointing out how his journalist’s compensation package didn’t
exactly rival Rupert Murdoch’s, he somehow envisioned a second act as a paid tax preparer moonlighting
for a large franchise which shall remain anonymous. Sort of like the occupational version of a mid-life
crisis, sans the Harley or the super-charged Camaro.
Far be it from me to be the proverbial dorsal ;n at the shipwreck, but I did my best to show him that a
franchise preparer was never going to be on the same pay grade as, say, a tax partner at a Big Four ;rm.
Besides, the preparer landscape is far di;erent from what it was even ;ve years ago, and not necessarily
for the better.
For one, the preparer market will be more di;cult for non-professionals. A franchise preparer in, say,
2005, would not be squarely in the net of the Internal Revenue Service’s sweeping preparer registration
mandate, which requires, among other things, applying for a Preparer Tax Identi;cation Number. In
addition, if you don’t happen to be a CPA, attorney or enrolled agent, you’re required to pass a competency exam and suitability check, all of which are expected to start this fall, and complete 15 hours of
CPE beginning in 2012.
For another, tax prep revenues are down. As an example, of the 16 ;rms that comprise the Top Tax
Firms as part of our Top 100 Firms report, 12 reported revenue declines from the prior year. One of the
notable exceptions was Liberty Tax Service, which was up more than 20 percent, and recently ;led for
Conversely, Jackson Hewitt, which in August won court approval to exit bankruptcy with a revamped
balance sheet, is still reeling from years of problems and customer complaints with its refund anticipation
loan business, which culminated with banking regulators ordering its primary RAL provider, Santa Barbara Bank & Trust, to exit the RAL business. In fact, the company’s unsecured creditor body is top-heavy
with plainti;s in class-action lawsuits that challenged Jackson Hewitt’s practices in o;ering RALs.
Halfway across the country, H&R Block — which, incidentally, prepared 24. 5 million returns last year,
for those keeping score at home — made headlines when its board agreed to let its McGladrey & Pullen
unit buy back RSM McGladrey Inc. for $610 million, re-uniting the assurance, tax and consulting practices under an integrated McGladrey & Pullen partnership structure. However, generating a far lower
headline pro;le was the fact that Block reported a widened ;rst-quarter loss of $173.4 million — magni-;ed by the after-tax charge for the RSM sale — compared to red ink of $127.6 million in the year-ago ;rst
quarter, or the fact that both systemwide revenues and pro;ts have been sliding since 2009.
;e RSM deal fueled rumblings that Block itself may soon be placed on the, well, block, as a possible
target for a large ;nancial services ;rm or even an IT conglomerate.
I don’t know if I can see a venture capital concern or even a Microsoft, for example, breathlessly awaiting to enter a largely franchised and unfamiliar market like tax prep and sweeping up Block.
But as much as I’m loath to admit it, I’ve been wrong before.
I also cautioned my friend to hold o; on that Harley — at least for a little while.
Published by SourceMedia Inc.,
One State St. Plaza, 27th Fl.,
New York, N. Y. 10004
Phone: (212) 803-8200/Fax: (646) 264-6828
E-mail: Ac Today@sourcemedia.com;
staff are ; email@example.com.
(unless otherwise indicated in parentheses).
EDI TOR-IN-CHIEF Bill Carlino
Managing Editor Daniel Hood
Senior Editors Roger Russell, Danielle Lee
Technology Editor Seth Fineberg
Ex. Director, Creative Services Sharon Pollack
Associate Art Director Wen-Wyst Jeanmary
Contributing Editors Ted Needleman;
Exec. Director of Mfg.
Group Marketing Dir.
ADVERTISING AND BUSINESS SERVICES
Publisher Rob Whitaker
Associate Publisher Gary DeHart
Advertising Director Jack Lynch
VP Business Development
Advertising Sales Coordinator
Assoc. Production Manager
To subscribe: $119 per year. Group discounts are available.
Call (800) 221-1809.
Customer service: Call (800) 221-1809
or e-mail firstname.lastname@example.org.
Free conference copies:
To arrange for shipment four weeks prior to meeting date,
call (212) 803-8810.
REPRINTS AND LIBRARY SERVICES
Material in Accounting Today may not be reproduced
without express written permission.
Article reprints: Godfrey R. Livermore,
Director of Reprints & Alternative Media Sales
Tel: (888) 909-6366 Fax: (212) 803-1577
EVP & Managing Director,
Banking and Capital Markets
EVP & Managing Director, Bruce Morris
Professional Services & Technology
EVP & Chief Content Of;cer David Longobardi
SVP, Inside Sales & Tech Adam Reinebach
VP, Finance Jamie Brokowsky
Director of Human Resources Ying Wong
Douglas J. Manoni
All manuscripts, materials and other submissions to Accounting Today become the property of SourceMedia Inc., the publisher. In making submissions, contributors agree to grant and assign to SourceMedia Inc. all of the
contributor’s rights, title and interest in and to the work, including, without limitation, its title and all right to copyright the work in the publisher’s name or otherwise for the publisher’s bene;t. SourceMedia Inc. reserves the right to
utilize the work or portions thereof in connection with the magazine and/or in any other manner it deems appropriate.
Accounting Today (ISSN 1044-5714) is published monthly by SourceMedia, Inc. Subscription price $119 per year in the U.S., $229 for Canada and all other foreign countries. Periodicals postage paid at New York, NY, and additional
of;ces. POSTMASTER: Send address changes to Accounting Today/ SourceMedia, Inc., P.O. Box 530, Congers NY 10920. Publishers Copy Protection Clause: Advertisers and advertising agencies assume liability for all content
(including text, representation and illustrations) of advertisments and responsibility for claims arising therefrom made against the publisher. Copyright © 2011 Accounting Today and SourceMedia, Inc. All rights reserved.
This magazine is printed on 100% Recycled
Paper with 85% Post Consumer Waste