![]() ![]() has employed data analytics for compliance risk and audit selection purposes and is increasingly reliant on employing “digital platforms to facilitate real-time or near real-time collection and assessment of data”. E&Y reported that government agencies all over the world are under pressure to become more efficient – the U.S. In some respects, the consumer has become increasingly comfortable with software services such as TurboTax because the government itself is digitizing as well. Given its clean user interface, integrated customer support capabilities, and pay-for-use flexibility with respect to additional services from tax professionals, TurboTax customers typically have positive experiences, saving time and money in the process. Intuit, the parent company of TurboTax, has estimated that the entire DIY category has gained about two percentage points of market share from assisted tax preparation as of February 2016. While TurboTax and H&R Block each offer different products, they are both competing for the same customer – individuals who are seeking assistance filing their taxes. The biggest threat to H&R Block is TurboTax – a less expensive, DIY software-as-a-service (SaaS) solution provided by Intuit. Customers have begun prioritizing flexibility and expediency, and the mix has shifted away from assisted prep towards DIY. The hidden truth is that the overwhelming majority of tax returns are actually quite straightforward, and consumer behavior is shifting as more people realize this fact. The issue is that the cost required ($150 – $300+) for this assurance is not commensurate with the benefits of paying for in-person tax preparation services. ![]() In many respects, the value most customers receive from H&R Block is peace of mind. Despite this, many investors remain skeptical of the long-term viability of H&R Block’s core business model, due to the digital threat of do-it-yourself (DIY) tax preparation providers. ![]() The company has also established a formidable retail footprint, with a physical office location within 5 miles of most Americans. ![]() This, in part, explains how H&R block has successfully built and maintained its market-leading position in assisted tax prep: in fiscal 2016, the company prepared approximately 1 in every 7 United States tax returns, and provided over 23 million returns globally. Most people fear what they do not understand, and tax return filing falls squarely within that category. H&R Block, a $5-billion market cap, Missouri-based provider of consumer tax preparation services, has benefited from this issue of tax opacity for decades. It doesn’t help that the government seems to view this complexity as a point of pride – the IRS website features an ironic quote from Albert Einstein, the world-famous Nobel Prize-winning theoretical physicist: “The hardest thing in the world to understand is the income tax.” Over time, our tax code has only become increasingly esoteric. America has a storied hate-hate relationship with taxes. Tuesday, April 18 th is the next Tax Day in the United States. ![]()
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