Short-Term Incentive Plan - H&R Block Inc.

                       H&R BLOCK SHORT-TERM INCENTIVE PLAN
                                  (AS AMENDED)

                                    ARTICLE I

                                     GENERAL



Section 1.1 Purpose.

     The purpose of the H&R Block Short-Term Incentive Plan (the "Plan") is to
attract and retain highly qualified individuals as executive officers; to obtain
from each the best possible performance in order to achieve particular business
objectives established for H&R Block, Inc. (the "Company") and its subsidiaries;
and to include in their compensation package a bonus component intended to
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), which compensation would be
deductible by the Company under the Code.

Section 1.2 Administration.

     The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee") consisting of at least two
members, each of which shall be an "outside director" within the meaning of
Section 162(m) of the Code. The Committee shall adopt such rules and guidelines
as it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of the Company, to execute and deliver documents on behalf of the Committee. The
determination of the majority shall be final and binding in all matters relating
to the Plan. The Committee shall have authority to determine the terms and
conditions of the Awards granted to eligible persons specified in Section 1.3
below.

Section 1.3 Eligibility.

     Awards may be granted only to employees of the Company or any of its
subsidiaries who are at the level of Assistant Vice President or at a more
senior level and who are selected for participation in the Plan by the
Committee. A qualifying employee so selected shall be a "Participant" in the
Plan.

                                   ARTICLE II

                                     AWARDS

Section 2.1 Awards.

     The Committee may grant annual performance-based awards ("Awards") to
Participants with respect to each fiscal year of the Company, or a portion
thereof (each such fiscal year or a portion thereof to constitute a "Performance
Period"), subject to the terms and conditions of the Plan. Awards shall be in
the form of cash compensation. Within 90 days after the beginning of a
Performance Period, the Committee shall establish (a) performance goals and
objectives ("Performance Targets") for the Company and the subsidiaries and
divisions thereof for such 


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Performance Period, (b) target awards ("Target Awards") for each Participant,
which shall be a specified dollar amount, and (c) schedules or other objective
methods for determining the applicable performance percentage ("Performance
Percentage") to be multiplied by each portion of the Target Award to which a
Performance Target relates in arriving at the actual Award payout amount
pursuant to Section 2.4 ("Performance Schedules"). The Committee shall specify
the Performance Targets applicable to each Participant for each Performance
Period and shall further specify the portion of the Target Award to which each
Performance Target shall apply. In no event shall a Performance Schedule include
a Performance Percentage in excess of 200%.

Section 2.2 Performance Targets.

     Performance Targets established by the Committee each year shall be based
of one or more of the following business criteria: (a) earnings, (b) revenues,
(c) sales of products, services or accounts, (d) numbers of income tax returns
prepared, (e) margins, (f) earnings per share, (g) return on equity, (h) return
on capital, and (i) total shareholder return. For any Performance Period,
Performance Targets may be measured on an absolute basis or relative to internal
goals, or relative to levels attained in fiscal years prior to the Performance
Period.

Section 2.3 Employment Requirement.

     To be eligible to receive payment of an Award, the Participant must have
remained in the continuous employ of the Company or its subsidiaries through the
end of the applicable Performance Period, provided that, in the event that the
Participant's employment terminates during the Performance Period due to death,
disability or retirement, the Committee may, at its sole discretion, authorize
the Company or the applicable subsidiary to pay in full or on a prorated basis
an Award determined in accordance with Sections 2.4 and 2.5. For purposes of
this Section 2.3, (a) "disability" shall be as defined in the employment
practices or policies of the applicable subsidiary of the Company in effect at
the time of termination of employment, and (b) "retirement" shall mean
termination of employment with all subsidiaries of the Company by the
Participant after either attainment of age 65 or attainment of age 55 and the
completion of at least ten (10) years of employment with the Company or its
subsidiaries.

Section 2.4 Determination of Awards.

     In the manner required by Section 162(m) of the Code, the Committee shall,
promptly after the date on which the necessary financial or other information
for a particular Performance Period becomes available, certify the extent to
which Performance Targets have been achieved. Using the Performance Schedules,
the Committee shall determine the Performance Percentage applicable to each
Performance Target and multiply the portion of the Target Award to which the
Performance Target relates by such Performance Percentage in order to arrive at
the actual Award payout for such portion.

     At the time that Target Awards are determined, the Committee may specify
that the Performance Percentage attributable to any one or more portions of a
Participant's Target Award may not exceed the Performance Percentage
attributable to any other portion of the Participant's Target Award. In the
event such specification is made, actual Award payouts shall be determined
accordingly.



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Section 2.5 Limitations on Awards.

     The aggregate amount of all Awards under the Plan to any Participant for
any Performance Period shall not exceed $1,000,000.

Section 2.6 Payment of Awards.

     Payment of Awards shall be made by the Company or the applicable employer
subsidiary as soon as administratively practical following the certification by
the Committee of the extent to which the applicable Performance Targets have
been achieved and the determination of the actual Awards in accordance with
Sections 2.4 and 2.5. All Awards under the Plan are subject to withholding,
where applicable, for federal, state and local taxes.

Section 2.7 Adjustment of Awards.

     In the event of the occurrence during the Performance Period of any
recapitalization, reorganization, merger, acquisition, divestiture,
consolidation, spin-off, split-off, combination, liquidation, dissolution, sale
of assets, other similar corporate transaction or event, any changes in
applicable tax laws or accounting principles, or any unusual, extraordinary or
nonrecurring events involving the Company which distorts the performance
criteria applicable to any Performance Target, the Committee shall adjust the
calculation of the performance criteria, and the applicable Performance Targets
as is necessary to prevent reduction or enlargement of Participants' Awards
under the Plan for such Performance Period attributable to such transaction or
event. Such adjustments shall be conclusive and binding for all purposes.

                                   ARTICLE III

                                  MISCELLANEOUS

Section 3.1  No Rights to Awards or Continued Employment.

     No employee of the Company or any of its subsidiaries shall have any claim
or right to receive Awards under the Plan. Neither the Plan nor any action taken
under the Plan shall be construed as giving any employee any right to be
retained by the Company or any subsidiary of the Company.

Section 3.2 No Limits on Other Awards and Plans.

     Nothing contained in this Plan shall prohibit the Company or any of its
subsidiaries from establishing other special awards or incentive compensation
plans providing for the payment of incentive compensation to employees of the
Company and its subsidiaries, including any Participants.

Section 3.3 Restriction on Transfer.

     The rights of a Participant with respect to Awards under the Plan shall not
be transferable by the Participant otherwise than by will or the laws of descent
and distribution.



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Section 3.4 Source of Payments.

     The Company and its subsidiaries shall not have any obligation to establish
any separate fund or trust or other segregation of assets to provide for
payments under the Plan. To the extent any person acquires any rights to receive
payments hereunder from the Company or any of its subsidiaries, such rights
shall be no greater than those of an unsecured creditor.

Section 3.5  Effective Date; Term; Amendment.

     The Plan is effective as of June 19, 1996, subject to approval by the
Company's shareholders at the Company's 1996 annual meeting of shareholders, and
shall remain in effect until such time as it shall be terminated by the Board of
Directors of the Company. If approval of the Plan meeting the requirements of
Section 162(m) of the Code is not obtained at the 1996 annual meeting of
shareholders of the Company, then the Plan shall not be effective and any Award
made on or after June 19, 1996, shall be void ab initio. The Board of Directors
may at any time and from time to time alter, amend, suspend or terminate the
Plan in whole or in part.

Section 3.6 Prohibited or Unenforceable Provisions.

     Any provision of the Plan that is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the Plan.

Section 3.7 Section 162(m) Provisions.

     Any Awards under the Plan shall be subject to the applicable restrictions
imposed by Code Section 162(m) and the Treasury Regulations promulgated
thereunder, notwithstanding any other provisions of the Plan to the contrary.

Section 3.8 Governing Law.

     The Plan and all rights and Awards hereunder shall be construed in
accordance with and governed by the laws of the State of Missouri.



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