updated 3/15/2007 5:01:23 PM ET 2007-03-15T21:01:23

H&R Block Inc. reported Thursday a 3.8 percent increase in clients using the company to prepare their income tax returns through the end of February, although much of the growth has come from online services, software and clients looking for early season refund anticipation loans.

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Overall, the nation's largest tax preparer said it has served 12.7 million clients since it opened its offices in November. Much of the growth has come as the number of customers using H&R Block's online programs or TaxCut software to prepare and file their income tax returns grew 15 percent.

About 9.8 million customers have visited the company's network of tax offices, or 0.9 percent more than the 9.7 million who visited a year ago. The bulk of those new customers came between November and the end of January when H&R Block began offering new loans for customers anticipating a tax refund but who had not yet received a W-2 form from their employers.

Some of those clients may not return to get their taxes done when they get their W-2, H&R Block officials have acknowledged, and the company's retail visits were down 2.7 percent in February.

Overall, the company said retail tax preparation fees are up 6.9 percent to $1.56 billion as the average fee has grown 6.9 percent to $159.82.

"Our year to date results are solid and continue to reflect a slightly slower start to the tax season industrywide," said Mark Ernst, the company's chairman and chief executive, in a news release.

The Kansas City-based company makes the majority of its revenue in the third and fourth quarters, which coincide with the annual income tax season.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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