Tax Prep Chains try to move into Accounting

[Lee B]

areDoes anyone

Does anyone remember about 15 years ago American Express tried to move into accounting by buying up local accounting firms and as this article mentions HRB has tried this before unsuccessfully ?

 

By Michael Cohn

August 28, 2014

H&R Block and Liberty Tax have been expanding from traditional tax preparation services into other areas such as bookkeeping as they reach out to service small business clients year-round, giving traditional accountants some extra competition.

On Tuesday, Liberty announced a bookkeeping service built around the cloud-based accounting software Kashoo. The new bookkeeping service, dubbed Liberty Accounting, is intended to help Liberty Tax’s 4,400 franchisees expand beyond tax season and provide additional services besides tax prep and filing.

The number one tax prep chain, H&R Block, recently announced plans of its own to attract CPAs and other accountants into selling their practices to Block or becoming franchisees (see H&R Block Reaches out to Attract Accounting Firms). In conjunction with that effort, Block also said it would start offering bookkeeping and payroll services to small businesses through cloud technology.

 

Competing tax chains such as Jackson Hewitt and TaxSlayer are still sticking to their core tax prep services, but if they see significant growth from Block and Liberty, they could be induced to change their minds.

 

This isn’t entirely a new trend. Individual franchisees for Block have already offered services such as bookkeeping and payroll in the past. Another franchiser known as BookKeeping Express offers bookkeeping services to small businesses through its franchisees. Block made a major move into the accounting field in 1999 with RSM McGladrey, operating what it called an alternative practice structure in conjunction with the CPA firm McGladrey & Pullen before selling the business back to McGladrey in 2011.

 

Block has tried other financial businesses in the past, such as the ill-fated Option One subprime mortgage business that it was forced to sell at a heavy loss in 2007. In this case, Block does not appear to be making such a heavy bet and is mainly out to attract small CPA firms whose owners are looking to retire or planning for an eventual exit.

 

If the idea catches on, small accounting practices could find themselves competing against Block, Liberty and perhaps other chains for their small business clients and will need to diversify further by adding extra services to avoid being lumped in with the franchises.

Do you think H&R Block and Liberty Tax will provide serious competition to traditional accountants in the small business market ?

[Gail in Virginia]

I guess it's time to add that lawn mower repair business for the off season.

 

/s

[ILLMAS]

Sign me up, I can just imagine the fees they would charge.

[SFA]

H&R Block & Liberty may be flirting with the CPA act in the state of Pennsylvania. The problem with bookkeeping is that many clients expect "financial statements" to be included with the service. When bookkeepers start issuing financial statements they have crossed the line into public accounting, which is regulated and controlled. I wonder what professional credentials each of the franchise firms will need to have to be able to participate as "bookkeeping" service providers?

[Lee B]

My main service is monthly writeup plus payroll processing. I provide monthly financial statements to these clients.

Technically, they are "internal use" statements. Frequently, my clients give copies to their bank who have always

accepted them without question or comment. Once in those 22 years, I had a client who was a subsidiary of a Swedish

Corporation who needed a Reviewed Statement, for which I arranged for a nearby local CPA Firm to do the Review.

As a practical matter, all the lenders in my area  seem to be very aware that external use Financial Statements

are very expensive and beyond the means of most small businesses.

[kcjenkins]

As long as they are clearly labeled "Unaudited - for Management use only" there should not be a problem.  

[MAMalody]

I get a little different take on this.  While it may be a business expansion, I wonder if it is driven by the expansion of use of the Free File program.  The companies refered to make a living off the less complicated tax returns, the quick in-and-out EIC returns, etc. It  may be they see a significant diminishing market in this arena of tax return preparation.

[kcjenkins]

That may well be behind it, but it's the RALs that really feed them, and that still keeps a lot of business flowing to them.

[SaraEA]

kc, RALS are gone.  Bank regulators don't allow any banks to offer them anymore because of the risks to their financial stability.  (We all know what happened to banks with too many shoddy mortgages during the housing meltdown.  They had to raise their standards or be shut down by the feds because they didn't meet capitalization ratios  The RAL banks were in the same boat because they made money by making risky loans.)  As far as I know no tax prep firms offered RALs last year.

 

I wonder if HRB and Liberty know what they're getting into.  Many small business owners know their trade well but haven't a clue about the money side.  You get a bag full of unidentified receipts, or nothing but bank statements leaving you to figure out what the payment to  "Acme renewals" is for.  They receive and pay a lot of cash.  They drop off their info for sales tax or payroll reports the day before they're due.  We already refer EITC clients to Block.  If the chains start offering accounting, I can think of at least two dozen clients we'd love to send their way.

[jklcpa]

kc, RALS are gone. 

 

 

They have the RACs and the fees that go along with them. Additional $68 in fees if the person chooses to walk out with a paper check.

 

You can choose to receive your refund proceeds, minus tax preparation and processing fees, on an H&R Block Emerald Prepaid Mastercard®, via a physical check or deposited to an existing account.

State RAC is disbursed using the same method you chose for your Federal RAC

Typically receive your funds within 21 days.

Email alerts when funds are available.

Federal RAC Fee $34.95

State RAC Fee $13.00

(Additional $20 fee for a paper check)

 

http://www.hrblock.com/financial-services/tax-refund-payment/

[kcjenkins]

I never did RALs, so did not realize they were gone, but since they still do RACs, it's pretty much the same thing.  

[MDEA]

No it is not the same thing. RALS were loans and had high interest rates.RACS are a way for people who do not have bank accounts or the money to pay for their returns to receive the refunds by direct deposit.

[kcjenkins]

Those RAC fees amount to a pretty high interest rate on what amounts to getting your refund just days faster and not having to pay the prep fees up front.

[Jack from Ohio]

I have 15 clients that PREFER to pay $20 additional just so they don't have to write me a check. My fees are subtracted from the refund, and the rest is Direct Deposited into their account.

I am considering raising it to $30 this year to try and wean out of doing them.

[joanmcq]

That's why I take credit cards.