HSBC Partner Block Restates Earnings
HSBC partner, tax preparer H&R Block, will restate earnings. The company, which is in the middle of its make-or-break season preparing other people’s tax returns, said it had underestimated its own “state effective income tax rate” in previous quarters — meaning it owes another $32 million in back taxes.
As a result, H&R Block said it would restate previously reported earnings going all the way back to 2004. The company also cut its forecast for full-year 2006 earnings, blaming, among other things, “a slower start to the tax filing season than in previous years.” Block is partners with HSBC Finance, formerly called Household International, in making abusive high interest rapid refund loans. Analysts expected H&R Block to report earnings of 26 cents a share on sales of $1.19 billion.
The company said its poor performance in the fiscal third quarter resulted from legal settlement costs related to its controversial early refund program and from a smaller-than-expected seasonal surge in filings by U.S. taxpayers
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H&R Block also said the costs of settling class-action lawsuits and slack business in its tax and mortgage arms caused its quarterly profit to drop 68 per cent from a year ago. Perhaps Internet sites like this one and many others, combined with bad publicity and an effort to educate consumers has paid off.
In January, Ella Mae Peterson, a 20-year veteran H&R Block preparer in St. Louis, was sentenced to 18 months in prison for her guilty plea in a tax-filing case. She allegedly cost the federal government more than $6.5 million by preparing returns with false business deductions and other fictitious entries, court records show. Peterson was also ordered to pay more than $840,000 to H&R Block and several individuals to cover losses from fraudulent returns.