Jackson Hewitt Tax Service Inc. -  Tax Preparation -  Category Main Page 

(973) 496-1040

7 Sylvan Way
Parsippany, NJ 07054

www.jacksonhewitt.com 
 

Sales

$201 million 

Business Description 

Jackson Hewitt is the second largest paid tax return preparer in the United States based on the number of tax returns filed by paid preparers, with a nationwide network comprised of 4,330 franchised offices and 605 company-owned offices as of April 30, 2004. We have grown rapidly, more than doubling the number of offices in our network since 1998 and our annual volume of tax returns prepared since 1999. In 2004, our network filed 3.1 million tax returns, an increase of 11% as compared to 2003. Despite our growth and industry position, we estimate that the 3.1 million tax returns our network prepared in 2004 represented less than 5% of the total paid tax return preparer industry in the United States.

We provide our customers with fast and accurate tax return preparation services and electronic filing. We provide one of the most comprehensive computerized tax return preparation services in the industry and are capable of filing any individual tax return. Our tax return preparation process is designed to ensure accuracy at each step. We use our proprietary software, ProFiler, which features built-in error detection, to prepare customers’ tax returns. We also check tax returns through systems at our corporate headquarters before electronically filing our customers’ tax returns with the IRS and the appropriate state departments of revenue.

We generate revenue from fees for preparing tax returns and electronically filing tax returns either directly, for those tax returns prepared in company-owned offices, or indirectly, in the form of royalty payments for tax returns prepared at our franchised offices.

Financial Products

We facilitate the sale of the financial products listed below that enable our customers to have access to funds more quickly than if they filed their tax returns on their own and waited to receive a refund directly from the IRS. We enable our customers to have their tax returns prepared by trained tax return preparers with no cash outlay at the time of filing. To obtain these products, our customers pay an application fee to our franchisees and company-owned offices, a fee to the financial institution providing the financial product and, in the case of a refund anticipation loan, a finance charge.

We facilitate the sale of the following refund-based financial products:

- Refund Anticipation Loan. Through this program, our customers may apply for loans in an amount up to $7,000, secured by their federal income tax refund. The borrowed funds are generally disbursed to customers within one to three days from the time their tax returns are filed with the IRS. In 2004, approximately 35% of our customers purchased a refund anticipation loan. This percentage has grown from 27% in 2001.

-  Money Now. Money Now allows qualifying customers to receive an advance of up to $730 on their refund anticipation loan on the same day as their tax returns are filed in anticipation of the receipt of their refund anticipation loan or tax refund.

- Accelerated Check Refund. This product is not a loan and is designed for our customers who wish to receive their federal and state income tax refunds quickly but do not elect to receive the funds immediately. Our customers choose to have their tax refunds deposited by the taxing authorities directly into bank accounts established for this purpose by a financial institution, generally allowing us to dispense bank checks directly to the customers within two to three weeks of filing their tax returns. In 2004, approximately 32% of our customers purchased an accelerated check refund. This percentage has grown from 30% in 2001.

-  Assisted Direct Deposit. This product is not a loan and is designed for customers who have their own bank accounts, but do not wish to make an up-front cash payment for tax return preparation. We facilitate the direct deposit of their tax refunds, net of any fees, into their checking or savings accounts.

We also facilitate the sale of the following financial products:

-  HELP. Through this product, qualifying customers receive an unsecured $575 loan during the November and December holiday shopping season provided by financial institutions.

-  Jackson Hewitt CashCard. We market this MasterCard-branded debit card, which our customers may accept as an alternative to a check when they choose the refund anticipation loan or accelerated check refund products. Customers may use the card to obtain cash at an automated teller machine or to make retail purchases at any location that accepts MasterCard. Customers pay an upfront fee, and transaction and other fees to the financial institution providing this product.

-  Gold Guarantee. Gold Guarantee is an extended warranty that extends our basic guarantee which covers only penalties and interest. Under the Gold Guarantee, if our tax return preparer makes an error, we pay for any additional taxes owed up to $6,000. The guarantee extends for a three-year period subsequent to filing.

- Receivables from the financial institutions that provide financial products to our customers are recorded in our wholly owned subsidiary, Hewfant, Inc.

Industry Overview

According to the IRS, approximately 131 million individual tax returns were filed in 2003. Of these tax returns, approximately 59%, or 77 million tax returns, were prepared with the help of a paid tax return preparer. The paid tax return preparer industry has grown over time increasing at a compound annual growth rate of approximately 4% from 1997 to 2003 and increasing as a percent of total returns filed from approximately 50% to 59% over the same period. In 2003, H&R Block was the largest paid tax return preparer, with an approximate 21% share, and Jackson Hewitt was the second largest, with an approximate 4% share. We believe that no other preparer has greater than a 1% share. Excluding H&R Block and us, the paid tax return preparer industry, representing approximately 58 million annual tax returns, is highly fragmented and consists of tens of thousands of paid tax return preparers, including national and regional tax return preparation services, accountants, attorneys, small independently-owned companies and financial service institutions that prepare tax returns as an ancillary part of their business. We believe we are well positioned to increase our share of the paid tax return preparer segment because of our strong brand name, our franchise model, our electronic filing capability and our ability to offer our customers fast and convenient means of obtaining funds associated with their tax refunds.

The increasing use of electronically-filed tax returns has been a significant development for taxpayers and the tax return preparation industry. To reduce administrative costs, the IRS has set a target of increasing the number of tax returns filed electronically to 80% by 2007. Through April 30, 2004, 49% of tax returns were filed electronically. Our network filed 88% of our tax returns electronically in 2004, making us a leader in this area. We believe that taxpayers have an incentive to file electronically because of the associated benefits, including acknowledgment of receipt of the filing, better accuracy and faster refund processing.

The industry has also benefited from year-over-year price increases. Our average revenue per customer has grown at a compound annual growth rate of 7% since 1999, which we believe is similar to pricing growth in the overall industry.

Tax Preparation Companies in the Directory

H&R Block

Jackson Hewitt