H AND R BLOCK <HRB> SEES GAINS FROM TAX REFORM With the April 15 tax return deadline less than a month away, confused taxpayers will be converging on H and R Block Inc's offices to interpret the new tax codes. Financial results for the nation's largest tax preparer are expected to be good in fiscal 1987 but next year could be a "bonanza," analysts say. "For the short term the key word is confusion, Block Vice President Tom Bloch said in an interview. "When Congress drastically changes laws, confusion results and tax preparers benefit," Bloch said. "Next year, when taxpayers take the new forms and place them side by side to compare them, more people will throw their hands up and say 'I'm going to get help,'" he said. "Tax forms will look very different next year," he added. Kidder Peabody analyst Herbert Buchbinder expects Block's fiscal 1987 year (to end April 30) to show good gains over fiscal 1986 earnings of 60.1 mln dlrs or 2.41 dlrs a share on revenues of 606.7 mln dlrs. He estimates Block's fiscal 1987 earnings at 2.75 to 2.80 dlrs. "Next year, Block could have a bonanza," Buchbinder said. Based on estimates of a larger work force, Block could show a gain of more than five pct in tax forms prepared, he said. In the 1986 tax season, Block prepared 9,215,300 U.S. tax returns, up 1.5 pct over the previous year. The Internal Revenue Service estimates about 100 mln individual income tax returns will be filed for the 1987 tax season, up from last year's 94 mln forms. Professional tax preparers accounted for just over 43 million forms, according to the IRS. For the longer term, while confusion will continue to bring clients into Block's 8,866 tax preparation offices worldwide, there are some changes in the act that will have a negative effect, Bloch conceded. Certain changes in filing requirements will shorten the tax return, and in some cases, simplify the form, he noted. In addition, some low income wage earners will be taken off the tax rolls, he said. Block is currently analyzing its price structure to try to offset some of the negatives. Last tax season, the average cost for each return in the U.S. amounted to 48.05 dlrs and 45.73 dlrs worldwide, Bloch said. This tax season, rates will be up about three or four pct, in line with the inflation rate, he said. Block expects "some expansion" this tax season of its electronic filing system which directly feeds into the IRS and can speed up the refund process. Block can choose where and by how much it wants to expand into the seven cities made available for the direct filing by the IRS, Bloch noted. The IRS estimates about 90,000 returns will be directly filed this tax season, up from the 26,000 returns injected in the 1986 tax season. First Kansas City analyst Jonathan Braatz said that Block will benefit greatly from lower tax rates in fiscal 1988. Braatz expects Block's advertising budget to be about the same as last year which will be helped a bit by lower costs for television ads. "They may get a little more bang for their buck," he said. He estimates Block has about 150 mln dlrs cash on its balance sheet sheet, and says if interest rates rise it could be of great benefit to them.