LIBERTY TAX Franchise: Earned Income Tax Fraud?
Liberty Tax franchises are running a low income tax fraud exploiting the Earned Income Tax Credit (EITC), and CEO John Hewitt knows all about it, according to Anon Source. What do you think?
(UnhappyFranchisee.Com) According to our reader Anon Source, a bunch of Liberty Tax franchisees are running a tax fraud by exploiting the rules around Earned Income Tax Credit.
Anon Source claims CEO John Hewitt knows all about the practice.
It’s not an entirely new allegation.
What IS new if that Anon Source names some of the franchisees he maintains are complicit in this fraud.
These allegations are the opinions of Anon Source and not necessarily shared by the publishers of this website.
We welcome rebuttals and other viewpoints, which can be shared below or by emailing us at UnhappyFranchisee[at]gmail.com.
What do you think? Share a comment below.
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To Whom It May Concern,
Liberty Tax CEO John Hewitt is hiding information about the following franchisees (and others) who are his biggest in the country and operate in low income areas and have been committing all types of tax fraud to fuel their growth with his knowledge and encouragement.
The newest scheme that they were using this year was putting people with no income and no dependents down for a small amount of fake “household income” on Line 7 of 1040 in order to trigger an earned income tax credit. They used Household Income in order to avoid having to have a W2 which would have been required and would be caught more easily. Then they would give the “client” their $50 cash in a flash money and take the remaining $350 or so of the refund as a tax prep fee through a bank product. Illegally stealing money from the American people and committing tax fraud by helping people to get refunds, which the franchisees and Liberty take most of, that they should not have gotten. John knows about this and has not terminated these franchisees or reported them to the IRS.
John knows about the tax fraud they were doing and even had a conference call with all of them and said that “if” they IRS catches on, he will give them up. Shouldn’t the CEO of a publicly traded company that handles almost 2 million tax returns have a fiduciary responsibility to not undertake in tax fraud? Or is he just trying to keep together his house of cards with hundreds of failing franchisees each year and thousands who aren’t profiting by enabling the bigger ones to keep the revenue rolling to him with this tax fraud. He is an accessory to this and needs to be punished. Many corporate employees know about this fraud as well. They call it the “H Returns”.
He once told a group of his top franchisees at an Elite meeting that as long as the IRS fine for earned income credit isn’t too big, they should look the other way and make the money. When you confront him with all this, he will probably give them all up but he shouldn’t be absolved as he has been undertaking in this kind of fraud his entire career. That is why so many of his franchisees are unhappy (your site has much more info about why and all of the failures they have – approximately 500 store closures last year alone). It seems that most of his business is either fraud, people who don’t make money or people who fail. Churn and burn and commit fraud and abuse low income people with high fees.
This household income scheme is only the latest that these franchisees have used over the years. Others have included abuse of the College Education Credit and of fake Schedule C forms for fraudulent Earned Income Credit and high fees as well as falsifying Schedule A deductions. A large franchisee in Detroit named Ahmed was recently shut down by the Justice Department for tax fraud in his offices. More needs to come to stop this blatant fraud. And other franchisees were recently barred from the tax business for fraud.
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Tags: Liberty Tax, Liberty Tax franchise, Liberty Tax franchise fraud, Liberty Tax fraud, John Hewitt, JTH Holding Inc., liberty tax complaints, Liberty Tax franchise complaints, Nasdaq: TAX
24 thoughts on “LIBERTY TAX Franchise: Earned Income Tax Fraud?”
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…
Anon Source calls BS on Liberty Tax’s claim that John Hewitt has created 800 millionaires:
LIBERTY TAX Illegal Franchise Earnings Claims?
The EIC fraud that is taught by Liberty and with Hewitt’s knowledge is not a new revelation. This has been going on for many years, even from the first meeting I had with Hewitt himself. He made it very clear to me that the IRS ignores this credit and willingly provide it for the “poor people”. He also said to me that this was the way to charge exorbitant fees because the people view it as “free money”. When I asked him about the legality of this, he had said that everyone in the industry does this and he had observed at HR Block and Jackson Hewitt this was the way he felt they could be making a lot more money, which is why he left both entities. This I took in because I was bedazzled at the time by the slickness of his presentation. Boy was I dumb for falling for that!
If the IRS was smart, they would just eliminate the EITC altogether in order to eliminate this kind of fraud which is all too common.
Another reason not to join up with these crooks.
It seems all of these allegations show up on this website, but are never sent to the IRS. I was a Liberty franchisee for 14 years. I never once heard John Hewitt advise any franchisee to do anything dishonest, much less illegal. This kind of allegation doesn’t pass the smell test. Hewitt has been in the tax business for over 40 years and has built two national companies. You think the kind of silly accusations texastee has made up would survive that long? Is the IRS that stupid? There are extensive due diligence requirements for EITC by the IRS, and Liberty has required EITC due diligence certification training and testing for every franchisee.
The IRS is fully aware of these allegations. They have chosen not to pursue Liberty because of all the lawyers that they employ. It is easier to go after the individual franchisees since they don’t have the deep pockets of the corporation. IRS is evaluated on the number of cases closed per year, not those that are opened. Its easier to close cases that have no resources to fight the IRS as opposed to a corporation that can afford to delay results.
That being said, Liberty was clearly teaching us franchisees on how to take advantage of the EITC in order to increase our client’s refunds and hence our fees and their royalties. If this isn’t illegal, I’m not sure what is.
As for motivation for Liberty to “rat out” its franchisees to the IRS, it could be argued that this is yet another way to churn and burn the territories so that they can be resold again to some hapless person. I’m sure Hewitt has a deal with the IRS to turn over the franchisees so he can collect a fee and resell the territory.
If the EITC were eliminated, this kind of abuse would go away along with Liberty Tax.
That’s not making sense. The choice to commit fraud is on the tax preparer. If a franchisee decides to commit fraud it means you believe the company has more power than the government. I have never been told or taught to do anything illegal in more than 10 years. Those committing fraud it’s their greed and choice.
The reality is there has been enough smoke that the IRS did and may still be investigating these allegations. I was a franchisee for 5 years and while I was never told or encouraged to do any creative tax returns that doesn’t mean other people weren’t. Maybe their approach was more selective. I am a CPA and didn’t operate in a low come area so maybe I wasn’t the right candidate. I will say I listened to the many daily conference calls and found much of the advice to be over the top and some down right unethical. During the Annie Fuller period, she with Liberty approval talked about taken her van into poor areas and essentially rounding up people to do their tax returns. There was once incident were she was at a stop and go station at 8 in the morning saw I guy buying beer, bought his beer for him and took him back to the office to prepare his return.
Liberty was aware there was fraud being committed but they chose to turn a blind eye to it. In my view they may not have directly committed the fraud but they were complicit by their lack of action and the fact they actually benefitted financial by these fraudulent acts.
Ms. Fuller is long gone and it’s not fraud to round up customers if they meet the requirements to file a return. In most cases an adult is smart enough to know right from wrong. I knew right from wrong when I listened to ms. Fuller. and made decisions accordingly. Truth is she doesn’t matter anymore. You can encourage someone to not buy a franchise without trying to tell them to believe all the hard working franchisees are committing fraud. That’s the point.
Guest: And what requirements need to be met to file a return? A babysitting business? How do you justify rounding up customers for a service that is filing a tax return. How do you know if they can afford to pay, simple from the bogus refund your going to create. The whole idea that you support smells of fraud.
As far as fraud stopping with Ms. Fuller, What about Mr. Hussien from Ohio and Mr. Amid from Illinois who where both indicted this year.
By the way where is your store located? The IRS might want to talk to you.
When I first got involved and old CPA said to me “you didn’t buy a brand your building a brand”. What I didn’t realize at the time is how the company doesn’t care about the brand.
I speak to the IRS all the time because it’s part of the tax business. I don’t prepare fraudulent returns because I respect the law. That’s my point. There are thousands of preparers filing fraudulent returns. It’s their choice. Fraud covers more than EIC filers. CPA’s are not exempt either.
Your original point was that Anne Fuller was long gone and that it’s up to each individual who prepares the return and there is no shared responsibility. Here as with all things involving this company: It it’s a positive fact it’s because of John Hewitt and the system. If it’s a negative fact its because of the franchisee who is either rogue or their not following the system.
In my view I just don’t know how the IRS can ignore the role of the franchisor when it comes to fraudulent tax returns. Especially when they advertise a tax franchise and charge $40,000 to purchase this system They seem to target people who don’t have any background in tax stating they don’t need to know tax regulations to purchase a franchise. The company is implying that by purchasing their franchise and following the system and using the software they will accurately be able to prepare taxes.
The company provides the software, induces franchisees to entice people with cash in flash, pushes high interest financial products and monitors all tax preparation fees through its software and financial products, but doesn’t have any responsibility when franchisees supposedly goes rogue. Your argument that Liberty Tax doesn’t hold any responsibility in fraudulent returns doesn’t hold any water.
^^Read VERY carefully what Bill wrote. A-n-y-t-h-i-n-g is possible with that hellhole of a company. :(
I’m currently training for a position at Liberty….not only am i required to ask multiple questions concerning EIC, I must document the answers, client must document the childrens addresses and I must report any irregularities….. I’m told many ppl walk out after being unable to verify their eligibility for EIC – simply saying I’ll go to (a competitor) they don’t make me give them these things……
Kathy while I recommend that you leave Liberty because they are a horrible company in my opinion. Likely those EIC questions are part of the requirements by the IRS. In addition, clients that can’t answer and walk out are likely trying to commit fraud. Definitely leave Liberty and go to Block.
Mike – Those people might be a plant either from IRS or they (frauds) are scouting for a tax office to send their people to in order file fraudulent tax returns. If they walk, thank your lucky stars.
FZ, agreed…let em walk and file elsewhere….hopefully they will get caught. That being said, Liberty Tax sucks!
The only reason I came back to Liberty for my second year as a Tax Preparer, the thrill I get from sniffing out the fraudulent clients, and sending them home, as well as the thrill I get of constantly learning how to legally make the tax code work not just for the rich but for ordinary people, and how taking the pivot from being a lawyer to doing taxes, has now opened up a pathway into accounting and financial planning that I didn’t expect to be excited about. The smile on my face from a happy to be educated client about how I navigated the Tax Code to maxmimize their refund/reduce their tax burden, plus book keeping tips for future years, and strategy about how to fill out the W4 to ensure they are more likely to get a refund than owe in future years, that has sustained me more than any year of my life prior to that when I was trying to crack the Bar Exam and become a lawyer.
So, while a lot of the bunk that I’ve heard and seen take place has turned me off to one day owning a Liberty franchise, my time at Liberty has sped up my learning curve tapped into my thirst for expanding my knowledge in taxes, accounting, book keeping, financial planning, and how to succeed and fail as a business owner. All while still allowing me to help people, and take advantage of the legal education I received.
Use ZeeNet’s Continuing Education and Tax School links to learn as much as you can. Use your time at liberty tax strategically to get work experience that will come in handy as you make a career in the areas of Accounting, Enrolled Agent, Auditing, Book Keeper, Tax Lawyer,, or Financial Analyst/Financial Planner/Tax Planner. Work at multiple offices, preferably different Zees, so you can see a broader range of clients & work with a wider ranger of colleagues, as well as get an on the job MBA in strategic business development and marketing. Soak up as much opportunity as a Preparer as you can to pick the brain of the Zees and learn from their successes and failures. That way you can make a successful go as a solo-practitioner/independent.
You are correct, Roger. There is a lot you can learn working for a tax business that can help you with any if the careers you listed. Just don’t ever think that owning a Liberty Tax is a good investment. Read the 1000’s of comments on this site and you’ll know why that is a bad decision.
The only way I can see liberty being a good investment is if I could have an office and equipment secured independently without financing through liberty, and if I could negotiate the royalty + 5 year commitment + fee on bank products to JTH. If I could get them to agree to 10 years + 10.5% royalty + a unilateral option allowing me to backout after 5 years upon paying an additional 15% royalty in order to continue offering tax services + waiver of the bankproduct fee taken out by JTH + allowing me to have a primarily peak 2 office that also is near a primarily peak 1 area + allow me to brand my office(s) accordingly, then I would do it. Because 5-10 years is sufficient time to evaluate the investment and determine if I am better of flying solo without losing my office, furniture, equipment, and access to my primary client base.
Obviously Liberty would not agree to your terms. You can do all of that, minus royalties, territory costs and big brother, on your own. What is it Liberty offers that makes it seem like a good franchisee? Take it from those of us who have been there…do it on your own or find a different line of work.
So this year I caught the Franchisee of an office in a peak 2 location, that I worked at, using my PTIN, holding himself out as myself to a client, and assigning my PTIN to other preparers when they couldn’t get their returns efiled with financial products or when the other preparers were working on my complex returns outside my presence, I even caught him forging my signature on an injured spouse form.
Am I obligated to use Liberty’s whistleblower hotline, or can I bypass Corporate and just dime him out to the IRS?
Why? Did you ask him what was going on? Where you no longer working with the them? Directly to Corporate. They will make sure your info is taken out of the system and handle the rest.
I would do both. That way if corporate does not do anything to the franchisee, the IRS will.
This franchisee seems to be connected at Corporate or affiliated with some of the LA Zees who either got shut down or walked away from their franchises. I know this because I worked at 4 different franchise locations this past year, and somehow the 2 new locations I worked at this past year (last only worked at 2 spots) were offices on his radar to purchase or offices he helped open up, and in one of these locations-some 20 miles away from his location-the client grid in LibTax 2012-2014 contained an extensive list of clients who have come thru the location where the franchisee used my identity.
I know why he’s doing it: a) going back to the end of peak 1 of the first year I worked for him, he mass texted the office telling us that because he came in below projections, corporate requires he start preparing tax returns. I assumed he had a PTIN, CTEC, and BOND-and left it at that. b) Flash forward to the last day of Peak2, I found out he doesn’t have a PTIN, CTEC, or BOND-I have his studpidity to thank for leaving open his version of ZeeNet on the computer I was using while in the office by myself. In figuring that out, it helped me put 2+2 together about what was taking place-because after I first became aware about someone using my info to do tax returns, I emailed the entire office with him being a recipient-requesting this to stop-after that, tax returns started getting filed under the name and PTIN of a Preparer who went awol from the office in late February.
I don’t know if I trust Corporate to not dime me out to him. He knows that of all the Preparers who worked for him, that I’m the smartest and most competent one in terms of education, compliance with due all diligence and ethical requirements, and client management. However even he restricted my ability to do things at this office, which also included restricted access in the LibTax client grid (unless I signed in has him with his consent), but I had no ability to figure out the whole charade with him unless I first had access his zeenet account.
Point being, if I went through CTEC/FTB & IRS channels, I’m more confident they’ll look to catch him in the act or just give him notice of violation (I would submit evidence to support my claim) instead of just show up to the office and say “so and so filed a complaint and ask him if this is true?”. I don’t know who he knows at Corporate but I wouldn’t be surprised if thru Tax Support they would be able to help him figure out that I’m the one who spilt the beans. Whereas, by going the IRS and CTEC/FTB route, he’s at least aware that one or two taxpayers who got negatively impacted could end up reporting him.