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H&R Block CEO Jeff Jones joins Yahoo Finance Live to discuss various aspects of this year's tax season and the company's services.
- Tax giant H&R Block just threw its hat in the ring in the growing mobile banking arena with its new app called Spruce. Here to talk about that and this year's tax season is Jeff Jones, CEO of H&R Block. Jeff, it's good to have you on the show again.
Thanks so much for being here. Before we get to Spruce, we have to touch on tax season a little bit because the IRS began accepting individual income tax returns this week. What is different this year that filers should know about before they fill out their taxes?
JEFF JONES: Well, let's start with some good news, which is e-file opened on time. I mean, with all the pressure the IRS is under, getting the season started on time is great news. It's another year where there's a lot on the plates of filers. Unemployment, recovery rebate credits, child tax credits, this famous letter, 6419 that you've probably heard of.
So it is another year where there's a lot that people have to navigate and for us, it's why we're here. And I've already spent several days out in the field with tax professionals. They're in full force and they're ready to serve whether it's online or in-person.
- I know that it's early in the process, but just wondering what business is shaping up to look like based on what the numbers look like this week for you. And you mentioned that incorrect child tax credit letter going out that the IRS is warning some taxpayers about. What should folks be looking out for there? It's a little confusing.
JEFF JONES: Yeah, sure. I mean, so first of all, we're coming off our best year in over a decade. We really built on that momentum in Q1 and we report Q2 next week. But the season is underway in full force and that letter that you mentioned, it's really, really important because that letter is going out to the 36 million recipients of the child tax credit.
The IRS did comment that maybe some of those went out incorrectly. We don't know for sure, but we estimate it's about 1% of the recipients received an incorrect letter, so it's still a few 100,000 people. But most people are going to get an accurate letter and it's really important for them to have that letter when they file. The IRS is telling the consumer that if they don't match what's on that letter with their tax return, they could be pulled for special processing. And again, that's why we're here, is to help consumers navigate those uncertainties.
- Yeah, you never want to give the IRS a reason for a red flag. And then finally on taxes, how has a higher inflation impacted tax season this year, especially when it comes to tax brackets?
JEFF JONES: Well, so I think we view inflation in a few different ways. Obviously, on labor for us, and we're very fortunate that even though we're a retailer and we have a physical footprint in addition to our software, our tax professionals on average have been with H&R Block for 10 years. They're not paid an hourly wage per se, so inflation has impacted us in the labor standpoint like it has other retailers, but we definitely hear it impacting with our customers.
And you ask how things are getting started this year. I hear every day when I'm in the field or listening in the call center consumers talking about how stretched they are. And this tax refund is the most important check they receive all year, so it's important to get it right, it's high stakes and that's what we're here to help.
- I want to spend some time talking about your new product, this mobile banking app called Spruce. It launched last week. It thrusts you into the mobile banking arena. Pretty crowded space there, Jeff. I know that you come to the table with a lot of brand recognition, of course, and some built in customers, but what differentiates Spruce from the dozens, literally, of other mobile banking platforms out there?
JEFF JONES: Well, I guess the first thing I would say is this isn't a new territory for Block. We've been in financial services for many years with our Emerald Advance our Emerald Card, our Refund Advance. But Spruce is a step change different. And when we looked at the landscape, we really saw two very different segments.
We saw the traditional banks, and banks don't always have the highest trust, but they have relationships and they have stability. We also don't always see them having the most modern user experiences and features. On the other hand, the fin-techs and challenger banks are feature rich, but we absolutely see that technology is becoming less and less a differentiator. So the Block brand, our physical distribution, the tens of millions of clients that already rely on Block every year for this high stakes, really personal financial event called the tax event, and the fact that we have billions of dollars of refunds that flow back through block to the consumer. So when we put all those things together, we believe Spruce is really right for the times and we know the Block brand is a great endorser for that.
- You already have about 20 million plus customers at H&R Block. Do those existing customers get any sort of preferential treatment, let's say, if they were to use Spruce? And also, I know it's early on, but what kind of material impact do you expect it to have on H&R's bottom line?
JEFF JONES: So this is building a new business really in the first week. So we absolutely have built a product that is for more than H&R Block clients. We know that 2/3 of America, according to the Financial Health Network, struggles with some component of their financial health, planning, saving, borrowing, et cetera.
And so we built Spruce with that in mind. And for the millions of clients we look across from every year and hear their story and their fears and their dreams. And so from day one, Spruce in the market is going to be as feature rich as what you already see in the market really from brands that have been at this for years. No hidden fees, Spruce Rewards, get paid two days early, really easy ability to save. So we believe, over time this can become a meaningful business for the company and we're definitely in it for the long term.
- All right, well as you mentioned, earnings out next week, I believe it's on Tuesday. So we'll be keeping an eye out for that.
JEFF JONES: That's right.
- H&R Block CEO Jeff Jones, always good to see you.