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William Cobb, H&R BlockThe failure to go after fraud in the tax software arena is a big part of gains by the do-it-yourself preparation business, H&R Block CEO Bill Cobb said in a recent earnings webcast. In reporting the tax store chains’ results for fiscal 2014, Cobb said that this year’s growth in D-I-Y filing came because the effort to prevent fraud involving the Earned Income Tax Credit is different for assisted returns.

“We believe there is an increase in the mix of returns filed with the earned income credit,” Cobb said. The effort to eliminate fraud has been almost totally aimed at those filing assisted returns. Cobb said the standards prepared by the Internal Revenue Service apply only paid preparers. If there had not been the shift of EITF filers to software, the assisted category would have grown, he continued.

For the year ended April 30, the company reported net income of $276 million, a slight increase from $274.4 million in 2013. Block’s revenue rose to slightly more than $3 billion, up 4 percent from $2.9 billion.

Another factor Cobb said was Block’s dropping its program for free 1040EZ filing in what its described as virtually all markets.  The result was filers who were only interested in price went to D-I-Y. Block got more revenue out of its remaining customers and lost a group from which it made little or no profit. Serving these clients also required personnel resources at stores, resources the company said it would be better providing to loyal customers. Despite a drop in returns, the company increased revenue in this area by $30 million.

The company said its revenue reflected a price increase of about 3 percent. Cobb said under the Tax Plus programs, Block grew its financial products, including refund transfers and prepaid Emerald Master Card, with overall revenue in this area up 11 percent.

Last modified on Wednesday, 18 June 2014
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