Is the number one tax prep service in the world about to get a little bigger? Liberty Tax Service founder John Hewitt has allegedly been shopping a deal with H&R Block Inc. Block is tops in the commercial tax prep world by the numbers but has taken a beating in recent months.

Despite reports all over the web announcing talks of a merger, H&R Block has refused to comment publicly on the matter. Speculation has been growing, however, that something is in the works after Thomas Bloch (yes, with an “h”) announced last week that he would leave the board of directors because of differences with the current company’s strategy. Bloch sent a letter to the board saying, among other things, that he thought a 2008 stock buyback was ill-timed and questioning the amount of compensation paid out to the company’s CEO. While the letter to the board was made public, Bloch refused to comment on any potential discussions with Hewitt.

Despite the fact that nobody’s talking, H&R Block’s stock rose on the news yesterday.

Jackson-Hewitt, the number two preparer of returns by volume, had reported a decrease in the number of returns that it handled this tax season. H&R Block reported a similar dip. Liberty, however, reported an increase. Liberty is considered the third largest tax commercial tax preparer.

If the names in the story are freaking you out a bit, let me see if I can help you out:

Henry Bloch started H&R Block together with his brothers in 1955. The Bloch family opted to spell the name with a “k” instead of an “h” to avoid having the name mispronounced as “blotch” – who would want that?

John Hewitt got his start in the industry after taking an H&R Block tax course in 1969. Thirteen years later, Hewitt founded Jackson Hewitt Tax Services Inc. Hewitt set his sights a bit higher, left that company and headed north to Canada in 1997. After acquiring Canadian tax franchisor, U&R Tax Depot, he founded Liberty Tax Service in the United States (They’re still in Canada, eh?).

Now, Hewitt wants to merge with H&R Block. Kind of coming full circle, I guess. It begs the question: will Lady Liberty wave her foam rubber torch in traffic next year in front of H&R Block offices, too?

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Kelly Erb is a tax attorney, tax writer and podcaster.


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