Kansas City, Mo. ? H&R Block Inc. expects its tax preparation business to do slightly better this year, but 2004 will still be challenging, chairman and CEO Mark Ernst said.

The chief of the nation’s largest tax preparer said the poor job market would limit growth in the firm’s core tax preparation business, but he was hopeful the online filing and financial services businesses would do better.

“I think this tax season’s going to be OK, but it’s not gonna be great,” Ernst said Wednesday in advance of the company’s annual meeting in New York. “We’re doing some really important things that we think will help us be successful in the market, but the economy is not working for us, it’s working a little bit against us.”

In 2003, the Kansas City-based firm served 18.2 million clients during the tax season, 2 million of which were online and software clients. The company has not released comparable estimates for 2004, but Ernst said that the firm expected to serve 2 percent to 7 percent more clients than it did in 2003 — an increase spurred largely by the company’s online filing business, which is expected to serve from 20 percent to 40 percent more clients.

He also predicted that revenue for H&R Block’s tax business during the tax season would increase between 8 percent and 12 percent over the previous year.

The company’s financial outlook remains unchanged. It expects to earn between $3.65 and $3.85 per share during the fiscal year that ends April 30, up from $3.15 in 2003.