LIBERTY TAX SERVICE Franchise Complaints

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?




5,274 thoughts on “LIBERTY TAX SERVICE Franchise Complaints

  • March 8, 2017 at 3:43 pm
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    WOW the spin was incredible, not to mention the market really must be glad that their compliance task force has really fixed all the fraud problems….sounds to me Libturdy Tax will be down double digits for the season, any other thoughts?

  • March 8, 2017 at 4:06 pm
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    Succession planning part sounded fishy to me. Market reaction is a bit of a surprise but no options available on stock, can’t short anymore and volume is so low it would be reasonable to assume it might be a short term run up by MM to give them space to unload there larger positions(relatively speaking). Only larger MM left holding it are index funds anyways. Average daily volume is well under $1M a day can’t unload much without major price moves and SEC regs. The business continues to degrade and the pace has increased to well worse that the market in general. They did a bit better than i was expecting but not a second half company there will no covering it up after tax season. Looks like the going bust phase is well under way. Still may have a year or two before implosion depending on how well they juggle.

  • March 8, 2017 at 6:15 pm
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    As of 2/28/17, Liberty return count is down 16.4%. IRS paid preparer returns were down over 12% on 2/24/17 and even less (8%) on 3/3/17. Since most Liberty clients are early season filers, it looks like a down year for Liberty.

    They do have less stores too (402).

  • March 8, 2017 at 11:28 pm
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    Libertys new 2020 goal is to be in business, forget passing Block. Liberty will be known as the fastest company to destroy a few thousand franchisee livliehoods! Awesome legacy for John Hewitt! Collect Billions and Billions of franchise fees off of EITC, promote fraud, highlight and reward the fraudsters at Convention and promote them on Conference calls. The fraud continues just at a lower scale since Liberty declined 16.4% there is now 16.4% less fraud in the system. If your leases are up, it’s time to bail.

  • March 9, 2017 at 8:22 am
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    Liberty Tax is done and John Hewitt knows it. His days are numbered that is why they are looking into a successor. At this point he is looking at a exit strategy out of this mess. He is hoping it does not involve jail time. When the feds are done investigating Bablu Shannabuddin, John Balkhi and Steve Deletzsky among others they will press charges against them and shut down corporate. He knows this so the time to get out is now. Those investigation will take another year or two to wind down.

  • March 14, 2017 at 5:27 pm
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    Well, as tax season continues, Liberty Corporation is getting 0.19 for every dollar a franchisee earns. Ouch!

    Liberty and John get richer and hopefully you generate enough business to pay the 19%, let alone make a profit.

    Very, very bad business model.

    You can buy professional software for under $1000 or you can pay 19% to Liberty on every dollar earned or $1900 on every $10K.

    I hope my simple explanations deter potential investors from buying into this business.

  • March 15, 2017 at 3:00 pm
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    You can buy software for $649 from Taxact. You can also make $13 from Republic bank for every tax return. Why the hell would you want to be part of this scam?

  • March 17, 2017 at 7:11 pm
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    Owner of Liberty Tax Franchises Pleads Guilty to Conspiracy to Steal from the State
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    March 17th, 2017 by WCBC Radio

    Maryland Attorney General Brian E. Frosh and Comptroller Peter Franchot today announced Vanessa Kone, owner of four Liberty Tax Service franchises and operator of six stores in Baltimore City, pleaded guilty to Conspiracy to Steal from the State. Baltimore City Circuit Court Judge Alfred Nance sentenced Kone to five years incarceration, all suspended, three years supervised probation, and ordered $38,041 in full restitution and a $10,000 penalty.

    In addition to Kone, eight of her former employees also pleaded guilty to taking part in the fraudulent tax scheme. Under Kone’s direction, the managers and preparers in the stores prepared and filed fraudulent federal and state income tax returns, claiming income tax refunds in the names of unwitting taxpayers. As part of the scheme, they claimed the taxpayers earned just enough money from miscellaneous sources to qualify for the maximum earned income tax credit. In fact, none of the taxpayers earned any income, often having been homeless, in drug rehabilitation programs, or disabled.

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  • March 17, 2017 at 7:12 pm
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    AND MORE GREAT NEWS!!!

    NEW HAVEN, Conn. (WTNH)– The Connecticut Department of Revenue Services has suspended tax processing at three local services after they received “a high volume of questionable returns.”

    DRS Commissioner Kevin Sullivan announced that the agency suspended processing electronic income tax returns from certain tax preparers in Ansonia, East Hartford and New Haven.

    “If I had the authority, which we don’t, we would probably suspend them from doing tax preparation. But the only thing I have ability to do is shut down the electronic filing until we get some answers,” said Commissioner Sullivan.

    The businesses affected are:

    Liberty Tax Service, 1003 East Main Street, East Hartford, CT 06108
    Perfect Preparer, LLC, 58 Main Street, Ansonia, CT 06401
    Perfect Preparer, LLC, 206 Dixwell Avenue, Suite 2, New Haven, CT 06511
    The owner of Liberty Tax Service in East Hartford wouldn’t go on camera but told News 8 the state reached out to him in November saying 67 out off the 600 tax returns they prepared last year were done with fraudulent W-2’s. He says he had no idea.

    “We hope there really isn’t a problem, it’s just that there was an aberration. We saw a pattern and we decided until that pattern can be explained we’re going to shut these down,” said Commissioner Sullivan.

    He did not release further details on the “suspicious filings.”

    Commissioner Sullivan says there is legislation in the works to have basic standards for tax preparers and increase oversight. He says the bigger the refund, the more tax preparers get paid.

    “There was a case last year in the state of Connecticut where someone was actually claiming like 200 dependents and they got away with it for a while,” said Commissioner Sullivan.

    He says clients of these companies shouldn’t be too worried but they could see delays with their returns. The three tax preparers affected can still file income tax returns with the state but they have to do it on paper only which means any refunds wouldn’t come for six to eight weeks.

    Free assistance in filing tax returns is available from the DRS by calling 860-297-5962 or going to any regional walk-in center in Bridgeport, Hartford, Norwich and Waterbury. For more information go to http://www.ct.gov/drs

  • March 20, 2017 at 7:43 pm
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    I have been passing by several Liberty Stores and have found them to be deserted. I know that this is a slow time of the season, but I usually pass by them around noon time as well as on my way home. This has been consistent throughout the year. I see the lights on, but no one in there. Maybe 1 preparer working. That’s it. I have seen the same lack of activity in the Jackson Hewitt’s as well. Even HR Block seemed quieter, even though they seem to have a few people within their stores. Has anyone noticed that this tax season has been slower for the street level preparation firms? Have the past deceptive practices by Liberty finally caught up to them? Are there more people using on line tax software?

    Thanks!

  • March 20, 2017 at 8:17 pm
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    It must depend on what state you’re in, but retail stores are down everywhere I think. If you don’t have experienced preparers and high retention rates, it’s trouble.
    I’m seeing returns from moms and pops with crazy deductions and credits, so I think its crazy out there.
    Also talked to folks (older customers) who I didn’t expect to use turbo tax and they tried it this year.
    It’s a new game and only the strong ones will survive with a new approach to get clients. The old ways no longer work. It’s change or quit.
    We are not down from last year but we know what we’re talking about and treat customers like they’re important, so they return.

  • March 20, 2017 at 8:19 pm
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    Texastee: I am seeing the same thing LTS ghost town JH about the same HRB has people but still slow but the IRS is still down allot. We will see how it pans out allot of things causing this in my opinion look at the IRS numbers. HRB has a 2nd half the other two do not we will see how it turns out.

    https://www.irs.gov/uac/2017-and-prior-year-filing-season-statistics

    http://comptroller.marylandtaxes.com/Media_Services/2017/03/17/owner-of-liberty-tax-franchises-pleads-guilty-to-conspiracy-to-steal-from-the-state/

  • March 21, 2017 at 9:04 am
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    Tuesday | March 21
    TAX PRACTICE
    Liberty Tax Earnings Down 48%. Founder Hewitt Wants Out.

    Hewitt
    Liberty Tax Inc. reports results for the third quarter ended Jan. 31
    By CPA Trendlines Research
    Liberty Tax, the chain of almost 4,000 tax prep offices, is suffering from a variety of problems, both internal and external, according to Founder and CEO John Hewitt.
    “The 2017 tax season marks another period of change for the industry as filing patterns continue to shift later into the season,” says Hewitt in a statement. “The whole industry has been slow, but we are clearly not satisfied with how we have performed in comparison to the market. There is still a lot of season in front of us and we are focused on delivering a strong second half and on implementing the appropriate changes to be successful in an evolving landscape.”
    Through Feb. 28, the company said it had prepared 915,000 U.S. tax returns, as compared to 1,094,000 U.S. tax returns prepared in the comparable prior year period, representing a decline of 16.4%. The company operated 3,823 offices in the U.S. in fiscal 2017, down from 4,225 offices in 2016.  The decrease represents a decline of 250 permanent office locations, as well as a reduction of 152 seasonal and processing center locations, some stemming from compliance problems.
    Hewitt surprised listeners on the company’s quarterly earnings conference call by saying he’s looking to turn over the reins. “It’s time I have a backup in the company,” he said.

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  • March 21, 2017 at 11:08 am
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    One thing for sure, Hewtwit will spin it anyway he can. Hewitt termed the results an “aberrant year” and that the company “has put the worst behind us.” That would seem to imply that they will have better second half season results. My guess is that they likely complete about 40% of their returns in March and April. These latter season filers are generally more educated than the first half season and meaning they likely read the news. The negative publicity with all the fraud that has been going around will punish this POS company further! This company is absolutely going out of business, the death spiral has started and will accelerate as negative results compound with negative territory sales. Hahahahahahahahahahahahah!

  • March 21, 2017 at 11:35 am
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    “It’s time I have backup in the company”, means he’s fleeing the country with all the money. Getting out while he can. DOJ & IRS: You had better prosecute him with all the info. you’ve been collecting on him for years. Please do not let him just walk away. If I had a chart of his face, I’d throw darts at it. He makes me physically ill.

    NCHillbilly: YOU ARE THE BEST!!! You always have the greatest of information!!! I LOVE reading your posts!!

    I KNOW for a fact that all these “fraudsters” were taught by no one other than the man himself. You definitely see an overwhelming amount of people “caught” from LTS locations. As soon as he leaves, the fraudsters will be no longer! They absolutely need to regulate this with proper licensing.

  • March 21, 2017 at 6:15 pm
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    I though John was not going to quit until Liberty was the #1 tax service in the universe? I would imagine Barvilla is shuttering his stores by now, too. If you are an owner, get out while you can, you will only lose more money.

  • March 22, 2017 at 10:06 am
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    Don’t flatter yourself believing customers are reading the news and leaving because of the company issues.
    Customers leave because of fees and turbo tax fighting hrblock which is decreasing fees across the board. The turbotax – hrblock fight is also hurting hrblocks. What would you do if they adv. free schedule a and you’ve been paying $400 – $500 to file?
    JH is empty because their season is over. Mostly EIC. They got a pick up due to paystub start. They will see an improvement.
    Market is declining and will continue to drop. People filing online or filing late.

  • March 22, 2017 at 11:38 am
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    Sorry guest my office is up 18% and growing. We have customers from Libturdy and Block even a small few from the free places.

  • March 22, 2017 at 2:06 pm
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    Mike’s situation is indicative of paid tax preparation trends. Guest1 is also correct, based on IRS filing data.

    What will continue to eat away at Blocks and Liberty’s customers base is the lower tax prep fees an independent can offer. I am surprised that a business model that produces revenues for 1/4 of a year to cover 12 months of expenses has been able to survive this long. Liberty will be the first market player to go bust.

    As for the do it yourselfers, they tend to be simple, low revenue producers for the tax prep industry.

    Bottom line is that the tax prep business has little variableness, other than the type of returns clients have. Sure, you can make money on bank products and other miscellaneous things but you only see your client once a year. The nature of this business means you better have a lot of volume to survive. Along with increased volume is increased labor costs so your profit margin increases some but often the extra work is maddening for the small window to do your business (4 months).

  • March 22, 2017 at 9:48 pm
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    Sad but true, you comments apply only to those storefronts that cater to the early-season, huge refund clientele. In our CPA office, we do bookkeeping, sales tax and payroll filing etc., but we also do tax year round. We have 150-200 clients who go on extension every year (October is like April 15 in our office). When someone gets a late tax doc after they already filed, we do amendments in the summer. I do estates, which have their own fiscal years. We deal with IRS letters clients bring in. And many of our clients aren’t seen “once a year” but call throughout the year (how do I fill out the W4 for my new job, I’m getting an inheritance, I want to gift some money to my kids, I’m refinancing and need whatever, and the ever popular, the IRS just called me and says they’ll put me in jail if I don’t pay right now.

    Block has year-round offices that can deal with these things, but they don’t keep all their zillions of storefronts open all year because there wouldn’t be enough work for all of them. JH in most locations and Liberty don’t have what it takes to service clients all year. So it’s not like there is no tax work after April, it’s just that they can’t/won’t do it. You CAN make a living doing tax work, but maybe not in a franchise that emphasizes volume instead of skill.

  • March 22, 2017 at 11:11 pm
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    SaraEA, Your office sounds like a typical CPA office. That is a year round business. I would not be surprised if your office had some former Block, Liberty, or JH clients looking to get tax prep work done after the April filing deadline. Most of the franchise stores have minimal off-season hours.

    Block survives on reputation and a large market share. Not sure about JH. Business marketing classes teach that there is normally room in the market for 2 or 3 major players. In the case of the franchise tax prep business, Liberty is number 3 and falling. When your market presence shrinks because of less stores and less return count, the trend is in place for failure.

  • March 23, 2017 at 11:37 am
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    Two ghost preparers arrested here locally in the last several weeks and had a client come in today that a ghost preparer really messed up for 5 years. Rep work cost will be minimal vs back taxes he owes. We are reporting the ghost preparer surely IRS CID will be more on corporate in timely fashion as they seem to be going after the 75-150 ghost preparers pretty regularly around me.

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