Tax preparer H&R Block (NYSE: HRB) warned this morning in a preliminary earnings report that it expects to swing to a deep loss for the second quarter, hurt by the declining mortgage market.

The company said it anticipates a quarterly loss of $502.3 million, or $1.55 per share. Included in its losses is $366.2 million, or $1.13 per share, related to discontinued operations. A significant part of its discontinued operations losses came from its Option One Mortgage Corp., which lost many lenders because of increased borrower defaults and deteriorating credit markets. H&R business was also hurt by the last week's failed proposed sale of Option One to Cerberus Capital Management LP.

The company also announced a pretax loss of $551.2 million for its discontinued operations related to mortgage assets sales, remaining mortgage origination, servicing assets adjustment and restructuring costs. For continuing operations, H&R Block reported a loss of $136.1 million, or 42 cents per share.

H&R Block motivated the delay in filing its quarterly report, saying the company had switched to auditing firm Deloitte & Touche LLP. The decision to change accounting firms came after dissident shareholder Richard Breeden was elected to the company's board of directors in September .

[photo : ChrisM70]

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.