H&R Block battles Intuit in tax software war

By Jim Finkle - Analysis

BOSTON (Reuters) - The two top makers of software for preparing U.S. tax returns are caught in a price war that could help H&R Block (HRB.N) win business from bigger tax software rival Intuit Inc (INTU.O).

Intuit raised the cost of its top-selling tax software, TurboTax Deluxe, by $15 to $60 this tax season, even as Americans are cutting back on spending in the face of the deepening recession and widening job cuts.

H&R Block, the biggest tax preparer in the United States and No. 2 in the tax software market, has kept the price of its comparable product, TaxCut, steady at $45, giving consumers a lower-priced alternative.

"H&R Block has a good opportunity to pick up unit share this tax season," said Michael Redmond, an analyst with NPD Group, a marketing consulting firm in Port Washington, New York, which tracks retail software sales.

TurboTax held 79 percent of the retail unit market share for personal computer software in last year's tax season, while TaxCut claimed 21 percent, NPD data shows.

Neither company breaks out sales of those specific products in its financial results, but Intuit's sales of TurboTax and related consumer tax products including Web-based software rose 14 percent last year to $929 million.

Kansas City, Missouri-based Block accounts for its sales as part of its U.S. digital tax solutions unit, where revenue dropped 4 percent in the year ended April 30 to $4.2 billion. Analysts say TaxCut sales account for only a small percentage of that business.

PRICING POLITICS

A botched attempt by Intuit of Mountain View, California, to limit the number of returns customers can file with one software package could also help H&R Block.

When Intuit introduced this year's TurboTax package, it limited customers to processing a single print return in its flagship product. Fees would be added for each subsequent return. TaxCut offers unlimited printing of returns.

Intuit reversed its stance on December 11, saying it would let customers print an unlimited number of returns with each software package and also electronically file five of them with the U.S. Internal Revenue Service.

That is in line with Block's policies for TaxCut.

Still, Intuit's original restrictions angered some loyal customers like Mark Adler, a systems engineer with NASA's Jet Propulsion Laboratories in California.

"TurboTax is not a bad product. But I'm concerned about the way they handled their pricing policy and customer complaints about it," Adler said. "I want to try the other product."

Industry analysts doubt that Adler is the only longtime TurboTax user angry enough to consider TaxCut.