For years, many Americans looking for help with tax preparation have headed to franchised accounting businesses like HandR Block. The reason for this is understandable: thanks to their size and considerable budgets, these organizations are able to roll out huge advertising campaigns and new features to attract customers that might be better served by smaller firms. However, reports from two of these large tax preparation chains themselves suggest that this trend could be shifting: both reported that the number of returns they prepared this year either had not increased from the previous year, or had even decreased slightly.
On Monday, May 4, Liberty Tax Inc. and HandR Block reported that their total number of prepared returns for the 2015 tax season were flat or down slightly from 2014. Liberty reported preparing 1.975 million returns this year through its offices and online services, compared to 1.991 million returns last year. However, the number of returns prepared in offices was up by 0.6% to 1.83 million from 1.818 million last year.Similarly, HandR Block reported that compared with the same period in 2014, the total number of the company’s U.S. assisted returns fell 4.6% through April 16 to 20,492,000.
The businesses attributed these declines to different causes: Liberty’s chairman and CEO, John Hewitt, said that the confusion around the Affordable Care Act did not drive more Americans to turn to paid accounting services as they had expected, and may even have reduced the industry’s overall return counts. Meanwhile, representatives from HandR Block said that the company believed that discontinuing its free federal 1040EZ promotion and the continued impact of fraud, particularly in regards to the Earned Income Tax Credit, could have harmed their success.
However, both companies could be discounting two major changes in consumer behavior: the increase of online services and the success of small accounting firms. Despite its overall decrease, for example, HandR Block reported that its tax software products, including online, desktop and mobile applications, grew 8.2%, showing that consumers might be seeking out online services instead. Likewise, smaller accounting agencies offer a variety of services, including personal finance, budgeting assistance, bookkeeping payroll services, audit accounting services, and of course, tax preparation. As a result, many people and businesses may have found it simpler to switch all of their financial work over to a local trusted business.
Liberty reported that preparing fewer returns, coupled with smaller than expected pricing increases, would have an adverse effect on the revenue it collects from its franchisees this year, although some expenses were incurred as planned. HandR Block, meanwhile, plans to announce its 2015 fiscal results on June 8.
