Tax-preparation firm H&R Block Inc. (HRB) posted higher-than-expected quarterly profit for its fiscal third quarter ending Jan. 31, 2009.

Block said profit from continuing operations rose to $66.8 million in the quarter, or 20 cents per share, compared to a $7.1 million profit, or 2 cents per share a year ago.

Analysts expected the company to earn 9 cents per share for the quarter, according to Reuters Estimates. Revenue rose 11 percent to $993.4 million, easily beating the $963.5 million analysts were expecting.

H&R Block Chairman Richard Breeden said the company is seeing a lot of low-income filers filing on their own, “or having their Uncle Louie doing their filings.” Nevertheless at the same time he said the company is seeing an increase in families in the $75,000-to-$125,000 income bracket giving H&R Block a look in lieu of the higher-cost providers they may have used in the past.

In the third quarter, Block said its tax services revenue increased 15.1 percent despite a drop of 3 percent in the number of clients it serviced. It said average retail fee per return increased 11 percent to over $191.

Perhaps more importantly Block said the trend continued in February as tax preparation revenue was up 6.5 percent for the month even as it experienced a 1.8 percent drop in the number of returns prepared.

The company said it plans to spend more on advertising to customers with incomes above $90,000, who typically generate higher fees, in the last few weeks of the tax season.

CEO Russ Smyth said one negative is that the economy is driving more of Block’s early season base of customers, particularly those with low incomes, to avoid filing a tax return this year or doing it themselves, as Breeden noted. He said he doesn’t know how long that will last, but expects people will be extremely price sensitive for “a good couple years.”

The company said that through February, 5.7 percent fewer taxpayers used its TaxCut software to prepare taxes, but its online products saw a 56 percent increase in returns filed.

Part of that was from a new free service aimed at lower-income filers, but the company hopes to turn those people into paying customers as their incomes increase.

Mr. Smyth said that with its strong third quarter results the company is on track to significantly improve the profitability of its businesses in fiscal 2009 (HRB also has a business services segment, RSM McGladrey and a consumer financial services segment, H&R Block Bank). He said the positive Q3 results in Tax Services and RSM McGladrey reflect good execution and strong focus on the core businesses.

This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.