TurboTax is crushing H&R Block in tax prep

Apr 15, 2019, 1:24 PM | Updated: 1:27 pm

TurboTax tax prep tax returns tax reform taxes special session...

Utah Governor Gary Herbert has called a special session of the Utah Legislature to address tax reform. (Photo: Getty Images)

(Photo: Getty Images)

By Paul R. La Monica, CNN Business

(CNN) — Americans are increasingly turning to financial software to do their own taxes. That’s great news for TurboTax maker Intuit, but it’s a lot less encouraging for H&R Block and other professional tax preparation companies.

The total number of self-prepared returns filed this tax season is up 3.3% compared to last year, according to figures from the Internal Revenue Service through early April. Meanwhile, the number of returns filed by accountants and other tax professionals fell 1% over the same period.

The growth in DIY tax returns is “encouraging” for Intuit, said JP Morgan Securities analyst Sterling Auty in a report this month. It’s a trend that has accelerated within the past few years.

So it’s no wonder that shares of Intuit are up nearly 250% in the past five years, while H&R Block has fallen more than 6% over the same time frame. Intuit has trounced the broader market as well: The S&P 500 has gained about 56% since April 2014.

The rise in popularity of tax software like TurboTax has clearly hurt H&R Block and its network of more than 10,000 tax preparation professionals. Sure, H&R Block has DIY software, too. But that business pulls in a tiny fraction of sales.

DIY tax preparation in the United States accounted for less than 5% of H&R Block’s total revenue in the first nine months of this fiscal year. Assisted tax preparation for US customers generated more than 40% of the company’s sales.

Intuit’s advantages

Intuit, on the other hand, generates about 30% of its overall revenue from DIY consumer software like TurboTax. (The company also owns QuickBooks, a line of small business software, as well as Mint, the personal finance app.)

“The DIY tax business has been growing much faster than assisted tax preparation,” said Michael Millman, an analyst who follows both Intuit and H&R Block for Millman Research Associates. “It’s going to be hard for H&R Block to catch Intuit and TurboTax.”

Tax reform hasn’t helped H&R Block, either.

H&R Block CEO Jeffrey Jones said in March that the company expects that more Americans will now be able to take the standard deduction.

Simpler tax preparation is not necessarily great news for H&R Block and its network of professionals. But Jones said that the changes to the way taxes are filed are why the company is trying to emphasize the software it provides for personal use.

“I never want to pretend like we have our head in the sand, and that there isn’t some migration happening, which is why we’re investing like we are in building out our DIY business,” he told analysts on a call to discuss the company’s earnings.

Intuit CEO Sasan Goodarzi, meanwhile, recently called tax simplification “really good for consumers” during a February earnings conference call.

Making matters worse for H&R Block, Intuit has introduced new products that target people who still want some tax assistance. The company launched TurboTax Live, which lets people chat online with certified public accountants, in November 2017.

Analysts also favor Intuit’s outlook. The company’s earnings are expected to grow 15% annually over the next few years. H&R Block’s projected growth rate is 10%.

Lack of competition from the US government

One competitor neither company will likely have to worry about anytime soon: the US government.

That’s because there is bipartisan support in Congress for a new bill dubbed the Taxpayer First Act, which would prohibit the IRS from creating its own online tax preparation software.

The bill is controversial. The nonprofit journalism website ProPublica has pointed out that both Intuit and H&R Block have lobbied Congress extensively to keep the IRS from setting up its own free tax filing system.

Asked about the bill, an H&R Block spokesperson told CNN Business that the company is “committed” to “providing help and inspiring confidence in our clients and communities everywhere.”

“We regularly engage with policymakers on matters that would benefit taxpayers, including the Taxpayer First Act, which would improve and modernize IRS service,” the spokesperson said in an email.

Intuit declined to comment specifically about the bill. But the company referred CNN Business to two blog posts about taxpayer empowerment and tax reform on Intuit’s Tax and Financial Center site.

™ & © 2019 Cable News Network, Inc., a Time Warner Company. All rights reserved.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Business + Economy

Lake Powell as seen from Navajo Mountain. The Navajo Nation is asking why their request for funding...

Eric Cabrera

Navajo Nation left wondering why funding continually denied

The Navajo Nation is asking why their request for funding for a road has been denied for the last 15 years.

3 days ago

Now hiring sign...

PAUL WISEMAN AP Economics Writer

US economy grew solid 3.2% in fourth quarter, a slight downgrade from government’s initial estimate

Far from stumbling, the economy grew 2.5% for all of 2023, topping the 1.9% growth in 2022.

3 days ago

baby feet, utah postpartum retreat helps new moms...

Britt Johnson

Utah company aims to help postpartum moms with special retreats

The founder of Utah Postpartum Retreat said she thinks new moms are at high risk for developing postpartum mood disorders because they lack support.

3 days ago

Power lines are pictured in utah, utah has lower electricity bill than other states...

Tammy Kikuchi

Study shows Utahns pay cheapest electricity bills in the country

Utah residents are paying less for power than any other state. Rocky Mountain Power says they work hard to keep it that way.

3 days ago

Welcome to Tooele sign is pictured on Saturday, Oct. 10, 2020.A Child was taken to a nearby Hospita...

Britt Johnson

Tooele Valley Airport to get some major updates

A new master plan for the Tooele Valley Airport will be shared with the public this week.

3 days ago

FILE - President Joe Biden speaks on student loan debt forgiveness, in the Roosevelt Room of the Wh...


Biden says too many Americans are saddled with school debt as he cancels federal loans for 153,000

The first round of forgiveness from the SAVE plan will clear will help with $1.2 billion in student loans.

4 days ago

Sponsored Articles

Mother and cute toddler child in a little fancy wooden cottage, reading a book, drinking tea and en...

Visit Bear Lake

How to find the best winter lodging in Bear Lake, Utah

Winter lodging in Bear Lake can be more limited than in the summer, but with some careful planning you can easily book your next winter trip.

Happy family in winter clothing at the ski resort, winter time, watching at mountains in front of t...

Visit Bear Lake

Ski more for less: Affordable ski resorts near Bear Lake, Utah

Plan your perfect ski getaway in Bear Lake this winter, with pristine slopes, affordable tickets, and breathtaking scenery.

front of the Butch Cassidy museum with a man in a cowboy hat standing in the doorway...

Bear Lake Convention and Visitors Bureau

Looking Back: The History of Bear Lake

The history of Bear Lake is full of fascinating stories. At over 250,000 years old, the lake has seen generations of people visit its shores.

silhouette of a family looking over a lake with a bird in the top corner flying...

Bear Lake Convention and Visitors Bureau

8 Fun Activities To Do in Bear Lake Without Getting in the Water

Bear Lake offers plenty of activities for the whole family to enjoy without having to get in the water. Catch 8 of our favorite activities.

Wellsville Mountains in the spring with a pond in the foreground...

Wasatch Property Management

Advantages of Renting Over Owning a Home

Renting allows you to enjoy luxury amenities and low maintenance without the long-term commitment and responsibilities of owning a home.

Clouds over a red rock vista in Hurricane, Utah...

Wasatch Property Management

Why Southern Utah is a Retirement Paradise

Retirement in southern Utah offers plenty of cultural and recreational opportunities. Find out all that this region has to offer.

TurboTax is crushing H&R Block in tax prep