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LIBERTY TAX SERVICE Franchise Complaints

August 11, 2009

UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiarliberty_logo with the Liberty Tax franchise, please share a comment below.

Entrepreneur magazine has ranked the Liberty Tax Service franchise #3 behind  McDonald’s & Subway.  However, some commenters who claimed to be former Liberty Tax franchisees left stern warnings on the Franchise-chat forum.

BostonTax wrote:

I’m a former Liberty Tax Franchisee



I hope you are ready for a little enlightenment! I held a successful Liberty Tax Franchise for 5 years until I decided to let the franchise agreement lapse. I did this for a few reasons:
1. The royalty fees were outrageous! 14% went to normal royalty while and ADDITIONAL 5% went for so called advertising royalties. The ad royalties were supposed to be put back into your local market to build the brand name. This was never done! All advertising in addition to the ad royalty I had to pay for because it did not fit into Liberty’s concept of advertising. I don’t know exactly what the concept was because our AD could not give an answer and the approved methods changed by the week.
2. Corporate was totally unresponsive to the needs of the franchisees. The AD system is designed to recruit anyone who can write a check for 100K. No other skills or ability required.
3. The minute you are behind in a royalty payment, they send you a notice to cure. After that, if you don’tpay, they try to terminate your franchise agreement.
4. Upon termination, Liberty enforces through legal proceeding a 2 year, 25 mile radis non compete clause that is in the franchise agreement. This is enforceable in the Eastern Division of the Federal District court, where, at least 2 Liberty friendly judges preside.
5. Liberty does not recognize chargebacks for bad debts as an adjustment for your royalty fees. All royalties are based on your gross, not your net collectable. This was an ongoing issue with them and the accounting department did not have the ability or the inclination to resolve!
My best advice is do not go with these guys, they are bad news. If you like to have people collect royalties and provide no support, then this is the franchise for you! It is very expensive to get into, the initial fee is around $32K just to buy the territory plus those pesky royalties. You can’t make money on this concept.

Most of the surviving franchisees I’ve talked to in the last 2 years have experienced great difficulty not only in making a profit, but in the corporate support or lack thereof.Remember, 19% of your gross is getting kicked back to Liberty, which is excessive by any standards. Please do yourself a favor and call former franchisees ,those that are currently getting sued (they are very likely to talk, as I found out), and current ones to try to get the straight poop.

Barbara Green wrote:

I too was a Liberty Tax Franchisee and I agree with everything you said.

The only reason for purchasing any franchise is because the business model is a proven marketing success as evidenced by the profitable franchisees. That is why you pay a license fee of $25,000. Being profitable is not in the cards for a Liberty Tax franchisee. Liberty Tax’s market/ business model is aimed at individuals who have very simple tax returns, i.e one W-2 and standard deduction which is why they were very successful in Norfolk, Va. That market is full of military people with one w-2.

Liberty will sell anyone a franchise at any location, in any georgraphic area, even if there is not a chance in hell of the franchisee being successful.

At one time, I too owned a Liberty Tax Franchise for one tax season. It was only one season because of the behavior of the Regional Manager who called me on January 15th demanding and screaming “Why had I not generated 200 tax returns and that maybe this business was not for me. I was stunned and confused since employers are given until January 31st. to give w-2’s to employees. Apparently, he thought that I was in Norfolk, Va. where that is possible.

It only goes downhill from there. The bottom line is I lost all of my investment in this businees (approx. $80,000) because I closed it rather than becoming a victim of this unethical company. NOthing would make me happier than to be a part of a class action lawsuit.

WHAT DO YOU THINK?  DO YOU OR HAVE YOU OWNED A LIBERTY TAX SERVICE FRANCHISE?  ARE LIBERTY TAX SERVICE FRANCHISEES HAPPY?  WHY OR WHY NOT?

Comments

4,520 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. Franchizee says:

    Another note about this franchise:

    LTS “requires” that your computers are purchased exclusively through a company named “Zones”. With your Zones computer system, your computer are built for exclusive use for LTS. Which means, there is a “back door” program built in to each computer purchased through Zones.

    For non technical people, every time you plugged the computer into the internet, a signal is released to LTS telling them you are on line. It was usually through just the processor (main computer for processing and sending efiles), however, they have expanded to the whole computer system. With that signal, if at anytime someone is working and looking online, they can at anytime start your computer remotely (as long as it is plugged into a network system) and go through your whole computer system.

    Also with your computer system, they give you a router programmed. What does that mean, they have better access to your computers, because the router is programmed with LTS. How would I know this, one may ask? My router broke down and I went to Office Depot and replaced the “exact” same router and what a MIRACLE, it did not work and I was forced to order from Zones the same router.

    So, if anyone that has a LTS franchise, what should you do? When you decide to leave LTS, unplug all computers from the network and never put them back online.

    Next, throw away the Router. It is deadly and they can still access your systems.

    Change your DSL phone number, for LTS has that also.

    When you are not at the office, especially during off season, either detach the all the network cable from all computers or better yet, what I used to do is turn off the electric on all equipment when not being used. It is amazing how they can’t access anything when their is no power but can access with power if the network cable is on.

    This is how I suspect most people get burned by LTS, because LTS says it is okay to keep the computers and use them personally all you want.

    And now you know why, they want everyone to use all their systems after leaving LTS. Most do, since the cost of equipment is so outrageously expensive! Store them away.

  2. Henry Bloch says:

    #tinfoilonmyhead

  3. Franchizee says:

    Too bad Henry does not know where in his computer to verify the information. Most likely computer illiterate! Do you know where the back down is located on your LTS computers? Anyone out there.

    Take your computer to a computer expert and they will show you if you can’t figure it out. They are manufactured with a back door access for ever.

    Don’t take my word for it, look in your Zone computers.

  4. Guest says:

    Sorry but there’s hundreds of us that don’t have Zones routers. Also all of my computers didn’t come from Zones. No problems. Multiple locations.

  5. Sad but true says:

    They take your money for the territory you buy
    They take your revenue – 19%
    They have access to your computers, when on-line (according to previous comments)
    They keep your customers that you produced with your money
    They prohibit you from operating a tax business within a 25 mile radius of your territory – when you quit – you cannot sell your territory – no one will buy it
    They prohibit you from saying negative things about them – although their financials have enough negative information nowadays

    So, what is soooo good about owning a Liberty Tax territory? Henry knows, he was going back to the good life but just could not keep himself from coming back to this site. Cheers!, Henry! Maybe you can give us a list of what the good life is about.

  6. Henry Bloch says:

    Easy: All the $$$$$ I keep!!

  7. ZeeOut says:

    When I was a Zee, it was not mandatory that you buy from Zones, but we were told there would be no technical support for the computers if you didn’t.

    “All the $$ that you keep”.. good for you. . But that’s not the issue. The issue is whether the business model is profitable for the MAJORITY of the Zees. Especially the new Zees, looking at new territories.

    Also.. what is “lots of money”, how much profit.. define success.

    None of the surrounding territories where I was located were very successful. Ultimately some showed a profit, certainly not worth the amount of time and energy and initial losses and stress. Also NOT worth the 19% you fork over to LTS for NO marketing and area developers whose only qualification is some $$$.

  8. Franchizee says:

    We purchased Zone computers because it was recommended and they required the processor to be at least purchased from Zones.

    Zee Out is right there is no technical support anymore, but the last year I was there, they were providing it to all zees.

    The point is, unlike Guest and Henry spouting out nonsense, this is a reality if you purchase this franchise.

    Just like having an employer and using their equipment, cell phone, copiers and computers, they track your movements. It is common knowledge just google it if people are being watched.

    When it comes to Henry Bloch and others, remember, they be the “CEO” of their franchise, which means they don’t have clue of the day to running of this franchise.

    Most of the people on this forum actually ran the business and worked the day to day operations. Their are people to who well in this company but it is few and far between. Basically a cr@p shoot.

  9. ADMIN says:

    Anon Source claims that a number of Liberty Tax franchisees are committing tax fraud by lying to get Earned Income Tax Credits.

    He/she says John Hewitt knows all about it… and he/she names names.

    What do you think? Read and comment here:

    LIBERTY TAX Franchise: Earned Income Tax Fraud?

  10. Henry Bloch says:

    The IRS pays whistleblowers handsomely. But Anon Source says “nah…I’ll just post stuff on the internet.” Have you thought about the hundreds & hundreds of tax preparers that would have to be involved in this? Yet no one’s dropped a dime? On a scheme this large? Doesn’t pass the smell test. #tinfoilonmyhead…

  11. ADMIN says:

    Another opinion piece from Anon Source on the claim that John Hewitt has created 800 millionaires:

    LIBERTY TAX Illegal Franchise Earnings Claims?

    Could you be next????

  12. Sad but true says:

    All it takes is one processor at each location to alter each tax return. Bloch, why do you feel the need to defend Liberty? Also, how do you know if Anon Source has not blown the whistle already? Jail time is a scary thing and these are serious charges. I would not make light of this, fraud has already been uncovered twice this year with Liberty franchisee’s.

    Why would anyone want to buy a territory from this bunch? If becoming a millionaire is so easy, why have the corporate stores decreased in number, just like the franchisee owned stores? You would think the store openings would be multiplying like crazy if doing so would make one a millionaire.

  13. Franchizee says:

    Well I recognize names on the “EIC” Fraud list. Anyone who has done tax returns knows that only fraud will give you large numbers. People in the community will flock to the fraud office every year to get the same results.

    IRS has to realize, that it is a joint effort on the offices and the public to steal from the taxpayer. Most of this EITC people know it is wrong and just don’t care until they are caught. I had people who I got their EIC corrected and paid off their bill with the IRS and the following year, go and try and claim kids that are not theirs AGAIN. WTF is that? They went to H & R in our area to finish the tax return. Can’t have me do it, because I told them NO.

    The large offices are using fraud as their money making where half of their money is made before Feb 20th of every year. It is called the Peak. It is huge and if EIC were dialed back, half of H & R offices, most of Jackson Hewitts and over 1/2 of Liberty office would cease to exist and the tax payer may save money.

  14. Guest says:

    So John Hewitt takes credit for creating 800 millionaires?

    I wonder if he can name them?

    I guess he’d be willing to take the blame for creating hundreds of bankrupt debtors, also?

    That list would be a lot easier to verify.

    Here are the first 10 as a start:

    James E., Joplin, MO
    Ronald B. Ft. Valley, GA
    James P. Riverside, CA
    Shawn H., Alicia H. Fort Meyers, FL
    Robyn W. Chippewa Falls, WI
    Feroz M. Lawrenceville, GA
    Isaiah R. Sioux Falls, SD
    Katherine K. Petaluma, CA
    Robert G. Danville, PA
    Kenneth R. and Suzette R. Corvallis, OR

    There are many dozens more in PACER…

  15. SanFranDan says:

    BINGO!!!

    ANON SOURCE IS 1000000000% CORRECT!!!
    Take it from me as one that has been there, done that :(:(

    This is a lying, cheating, manipulating Franchise. Anyone that plunks down their hard earned $$ after these posts needs to seriously have their head examined.

    RUN AWAY! THIS IS A H-U-G-E SCAM WITH JTH LEADING THE PACK

    DO NOT, I REPEAT DO NOT SIGN THEIR CONTRACT. YOU WILL BE FOREVER CHANGED AND FOREVER IN THEIR DEBT. IT HAS BEEN MANY, MANY YEARS SINCE I SIGNED ONE 5 YEAR FRANCHISE CONTRACT AND ALL THESE YEARS LATER, LTS STILL HAS THEIR FIRM GRIP AROUND ME.

    ALL I CAN SAY IS RUN AWAY FROM THIS FRANCHISE AND GO ELSEWHERE. YOU WILL BE FOREVER GRATEFUL. I’VE SAID THE SAME THINGS FOR SEVERAL YEARS NOW. I K-N-O-W I HAVE HELPED CLOSE TO 100 PEOPLE THAT I KNOW OF, HOPEFULLY SEVERAL HUNDRED OR THOUSAND MORE FROM SIGNING THE BIGGEST MISTAKE OF THEIR LIVES.

  16. SaraEA says:

    Franchizee is being too harsh. I believe that most tax preparers take their responsibilities seriously and do not willingly participate in fraud. I worked at HRB for over a dozen years and worked with many, many tax pros during that time. I only know of two who knowingly bent the rules (three actually, but the third was defrauding the company not the gov’t). What I did see a lot of was clients who couldn’t get their way so took their papers and left. You know they went elsewhere, this time knowing what the questions were and the “right” answers. The new preparer had no reason to doubt them and was innocently enabling their fraud.

    “Anyone who has done tax returns knows that only fraud will give you large numbers.” Franchizee, you have got to be kidding or seriously jaded by what you have experienced. Where I work now our numbers are too large and we do not take new clients and fire some each year. We do everything by the book, which might just be one reason why we are so popular. Every tax pro gets some new clients every year who sensed/knew their former preparer was bending the rules and became uncomfortable. They chose to go elsewhere because they didn’t want to cheat anymore. I would bet every Liberty office gets some of them every year.

    I agree with Franchizee that EITC fraud is rampant. I just disagree that it is the only way to make money in the tax biz. Be an expert in tax, treat your clients fairly, charge them reasonable prices, be there for them, and they will come. Most tax professionals are PROFESSIONALS. Don’t paint them all with the same brush just because you know some who act unprofessionally.

  17. Texastee says:

    The problem is that Liberty consciously teaches its franchisee’s how to take advantage of the EITC. This seems to be fraud to me.

    The computers that Liberty makes you buy are modified with what is best described a spyware that Liberty uses to keep tabs on the Zees. This is because Liberty wants to keep tabs on the amounts of fees received vs the number of tax returns on the computer network. If too many returns have a zero fee, Liberty gets all over their franchisee by performing store ‘audits’ or harassing them for more money and paperwork to justify the actual receipts. If you do your online banking with their computer, they are able to see your bank balances. They hacked into my computer are were able to shut down my access to their message boards as well as communications with other franchisees.

    My IT manager discovered all these spyware worms when I brought in my computer for being slow and with viruses. Liberty has hacked your computers with any software that they provide. This was true when they were using Taxwise software when I was having trouble with compatibility of files. Taxwise had told me that Liberty modified the software that they bought for us franchisees and that a lot of functionality within their software was missing. They also hinted that Liberty added monitoring software to their product as well.

    This is how this company treats its friends-its revenue stream. Forget the fact that you own this business-they do! You own an asset that cannot be sold.

  18. Henry Bloch says:

    And the black helicopters are circling…#grassyknoll #fakemoonlanding #oyvey

  19. Franchizee says:

    SaraEA – I am not jaded, I saw what happened. There were two Top Guns in my area and I saw first hand how they looked the other way.

    People have to realize, that 6-7 years ago, there was no due diligence for preparers, so these Top Gun’s were doing what they always done, just do the minimum. You have to realize the average tax preparer with LTS only has 1 week of training through a class call “Rapid Class”. These people are not professional at all. They are under the gun to follow a script and have that person’s tax return signed sealed and delivered in under 15 minutes. If you can’t type and talk at the same time, you were toast. The go through returns as soon as possible. People don’t have time to figure out if anything is correct, if they want to spend money with LTS etc.

    The processing areas are a total mess. All they do is make sure signatures are correct and may just glance at a return and ship it off. They will guarantee, letters for the summer and fall months of missed information and viola, get to charge the client again to fix their problem. Also, people get their returns done so early, that they forget W-2 and 1099, voila, they get another charge for an amendment.

    Our AD also a Top Gun told us that we don’t have to question anything the person tells us, just have them fill out the Client Data Sheet and that data sheet will keep you from getting in trouble with the IRS because you just followed what the person put on the paper and if they got a letter, you just show them you put in the tax return as they requested without using any reason whatsoever.

    However, most people with LTS are still using this premise and we are now seeing the fallout.

    Also tax preparers did not follow Circular 230 up until the last 5 years or so. Hewitt is running from behind.

    So, I have seen lots of defrauding of the government. Thanks to all the “free” tax classes from H & R Block, LTS and JH, EITC is fast becoming a Taxslayer, Turbo Tax and all the free tax programs huge problem. They are not using better screening to catch ridiculous claims.

    Of course this is going on, because look at the huge fraudulent EIC claims going out and then being recalled the following year. Someone is processing those returns and mainly some tax preparers who are paid.

  20. Sad but true says:

    Yes, EIC is one of those lower income opportunities to commit fraud. The pressures on a struggling franchisee to “survive”, may lead to their turning a blind eye to those taxpayers who want to knowingly engage in this fraud.

    Liberty Top Guns have been charged with fraud, and Liberty Corp. collects the royalties for this. Since Liberty benefits from this, are they co-conspirators to this fraud? Maybe they are turning in their own and avoiding prosecution. Most Federal agencies require compliance from those whom operate under the umbrella of Federal programs. It is high time that Liberty, Block, JH, and other large tax firms are required to have ethics training and compliance programs. Incremental fraud, by one tax return at a time, adds up to millions or billions of dollars.

    Bottom line is this, stay away from any tax firm that does not espouse ethical values in their finished product. Firms like the one that Sara EA works for deserve kudos for doing taxes the right way.

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