H&R Block Gets Caught

H&R Block had to restate the past two years of earnings due to "tax problems". The media, including this Reuters article takes it as being that they messed up on their own tax returns. I can tell an accountant didn't write the article.

What H&R Block fudged made an honest mistake on was in its accounting for income taxes. The story says that it's state tax rate used for its financial statements was too low and they just figured it out thanks to Sarbanes-Oxley (SOX).

Anyone that has worked on a corporate tax footnote calculation is smiling at that. Everyone knows the state effective tax rate is too low but a song and dance happens every year to show that it's just a one year anomaly. CPA firms are scared to death at getting sued out of existance thanks to SOX, so they're not letting clients get away with the wink, wink, nudge, nudge anymore. And that's why, as the article notes, that there are a lot of "it's an honest mistake, honest" restatements happening thanks to the effective tax rate.

UPDATE: No, it looks like H&R Block actually used the wrong state tax rate on its tax returns and will now owe $32 million in back taxes. Because they owe taxes and have to restate earnings down, my guess is that they used too low a rate on the financial statements and too high on its tax return. How could that be? hmm....