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Liberty Results Up; Returns Drop

John Hewitt, Liberty Tax ServiceThe number of returns prepared and stores operated by Liberty Tax Service were down for the 2016 tax season. But when the company ended its fiscal year on April 30, net income more than doubled and revenue was up by 7 percent over fiscal 2015 with revenue from tax preparation fees and financial products rising as the company cut expenses by 4 percent and realized an increase of 5.3 percent in the average net fees

The Virginia Beach, Va.-based franchisor reported net income of slightly more than $18 million, compared to $8.1 million for 2015. Revenue rose to $173.4 million for the most recently ended year, compared to $162.2 million the prior year.

In this week's earnings webcast, CEO John Hewitt hit a theme that has been expounded by officials at H&R Block—and that is that independent preparers and returns prepared online are subject to far less regulation and controls than are the chains. And that has produced a market place shift.

"The reason the independents have taken share is fraud," Hewitt said. Block CEO Bill Cobb has had the same complaint. They claim because of the laxer standards for the other preparers, individuals that wish to file fraudulent returns, particularly involving the Earned Income credit, turn away from the national chains.

Tax preparation fee income hit $19.3 million, up 39 percent from $13.9 million for last year's corresponding period. That came as Liberty prepared 1,832,000 returns in the United States during the recent tax season, down from 1,907,000 a year ago. The number of Canadian returns dropped to 330,000 from 340,000.

Revenue from financial products rose to $45.3 million an increase of 22.3 percent from $37.1 million prior year the prior year. While the rate of growth was not as steep as for tax preparation fees, the $8.3 million increase in revenue from this program represented the bulk of the $11.3 million in increased income for the year.

 

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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