LIBERTY TAX SERVICE Franchise Complaints

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• People who qualify for EITC still have to file tax returns. EITC rules are really complicated, and the majority of those who claim it use professional tax preparers. I don't think that's going to change. Next year they will just have to wait a bit longer for their money.

  Time was when people filed their tax returns and waited for their refunds. With the advent of refund anticipation loans, people flocked to HRB where they could get the funds with a couple of days (and eventually a couple of hours). The enormous business they were doing encouraged competitors, Liberty among them. I think the whole thing hurt Block, which once had the reputation as "America's tax preparer," there for everyone who needed to file a return whether complex or simple. The focus on fast refunds not only enticed a lower-income, simple return group but scared the middle- and higher-income taxpayers away. (Just like I would never go to an auto dealer who advertises "Poor credit? No credit? No problem!) As Block shifted away from its roots to attract the EITC recipients, competitors sprung up and turned the whole tax prep business into a quick refund model.

  But RALs went away, and now quick EITC refunds will go away. All the chains will still have EITC clients because they are getting big sums of money and have to file to claim it. These people think CPAs and EAs will charge them too much so will continue to be chain customers. Why does everyone think it's all doom and gloom?

• SaraEA,

  I see this as a golden opportunity for the people who are competent and credentialed. The barriers to entry will increase because of the new licensing and training requirements.

  Block owns the market and will survive. But you will not be able to hire competent preparers for minimum wage.

  Also, the criminal penalties will curtail some of the fraud.

  Currently, you set up shop in a low income or even middle income neighborhood, the you will have an enormous challenge of competing with all the fraud.

  The demand for qualified preparers will increase. Prices are going to go up. One positive aspect of all of this is that a credentialed tax preparer will be able to make a decent living without dealing with the problem customers.

• I don't think it is gloom and doom. It actually gives legitimate preparers an advantage. It is frustrating to deal with clients that expect you to try to get away with "what won't raise any red flags". My response is; the truth.

  Anyway, I find it interesting that the Liberty Tax Unhappy Franchisee site has turned into a forum on tax issues of the day. Liberty Tax will die as a result of the regulations, if they become the law. Good, honest preparers will not come cheap. Prep fees will rise, pushing more to just do their own returns. Without all of this in place, paid return counts are already falling.

• Does anyone know if people in LTS received the AFSP certification this year? I received mine for the last two years. If they did not receive the certification, how are they going to represent their clients in front of the IRS or does LTS have a blanket coverage for that representation?

  I think all these changes will shave down the EIC offices and open opportunity for people who do taxes for accuracy and are serious about tax law and keeping people compliant.

• I wasn't able to listen to Liberty's call today at Noon where they reported on first peak performance and status of industry. Anyone else hear and have the scoop? If he says they are up, it will blow my mind, as the IRS is down, and paid prep is down 10%, and most of the Zees I know are down. I'll be watching for the replay to pop up to listen to I guess. John can spin like a top though, so I'm sure he put a positive angle on things. The other day he said the decline to date for IRS was due to restaurant employees being confused about their insurance. Most restaurants never had insurance for their employees anyway, so I almost spit out my drink that he'd say something so utterly stupid. He said once those people start filing there would be a delayed peak. Yep, sure, that's it!

• Anon keep us posted about the call. It would be a half truth at best but still interested to know.

• I'm shocked. John always spins something bad into something potentially good. Yet he said nothing, almost literally said nothing positive. Really, he didn't report Liberty's results, only the IRS stats as of last week. Paid prep down 7%, self prep up 3%. Says that some franchisees say this is a sign of a culture shift in the industry, but it's not according to him. It's just due to frustrated restaurant employees (who don't get healthcare anyway and never have by the way) now losing their insurance and ostriching instead of filing. Like they don't want their EIC John, that $300 penalty isn't stopping them from getting the $7000 refund filed ASAP. He almost literally said nothing else of note. If the numbers were up, he damn sure would have at least mentioned it, even if not with specific % or return count or $$. He would have said we were outperforming the industry or HRB or something. My guess is we are more than the 7% down the paid prep as a whole is. We shall see once Liberty reports for the Quarter.

  He didn't talk about the impact of all the FREE/FREE/FREE online filing that is being bombarded around everywhere, nor mention that HRB ate our lunches with the $1,000,000/day give away and with all their ads and we gave away $1k/day with no advertising. Didn't mention that our "competitive advantage" this year, the $750 loan was available to most every Mom-n-Pop too, and actually cost them less. Definitely wasn't exclusive or an advantage.

  Nothing to combat self prep, nothing to combat our competition, nothing to combat fraudulent self filers, nothing to combat our own fraudulent zees and preparers (think these scandals aren't contributing some to the decline in numbers? I have a bridge to sell you). I'm so disappointed in John, in corporate, in general. I will still make money, despite them, not because of them, but it has been declining, and will continue to decline. Trying to sell to get out of this when the values are falling like a rock is almost impossible as well. Just sad all around.

• Anon thanks for the info. Even Forbes has picked up on LTS issues. Taxes aren't going anywhere anytime soon but it's going to be a tuff transition lots won't make it. However this ends up medium to high skilled independents will do just fine and HRB will probably be the only retail brand to survive. My 2 cents.

  http://www.forbes.com/sites/kellyphillipserb/2016/02/19/tax-return-preparer-fraud-raises-concern-at-liberty-tax-other-preparer-sites/?utm_campaign=yahootix&partner=yahootix#28409d32672e

• Anon:

  I feel bad for you if you are a current zee. I do not feel bad for JTH at all, in fact I hope he burns to the ground. Your last paragraph is very telling. JTH himself is behind much of the fraud you see happening at different territories. Trust me, I'm not lying on this one.

  What skilled preparer in their right mind would work only for @ 12 weeks a year? It's about time that the preparers are scrutinized big time and that they have all kinds of rules & regulations to now follow. Had this happened years ago, there wouldn't be the EITC fraud that they are finally trying to halt. It's been happening for years. What they need to do is to trace JTH's involvement with HRB, then JH, then LTS to see the patterns.

  When I first began several years ago, JTH was pushing the free returns. What a crock. It helped HIS numbers, not yours. The fraud is rampant. It's about time they're finally putting the pieces together. Don't forget when JTH was de-frauding the gov't and teaching others how to do so, it was before the internet, and certainly before sites like this one. Now that we finally have a forum to vent (thanks, ADMIN!!!), finally the LTS numbers are going down.

  My advice? Jump ship while you can, with as much $$ saved as you can. It sounds like it'll get much worse before it gets better. Thank goodness it's finally starting to happen. Really so sorry to the current zees, however.

• I've been thinking, and I think the chink in the armor has appeared in JTH's underbelly. I honestly think a case could be made by current Zees against corporate that claims due to their lack of institutional control, that Zees have been harmed financially. That Liberty failed to protect it's brand, and monitor it, and Zees have suffered financial harm due to the negligence. Might be enough to get people out of the their contracts at least. Maybe even get their investments back. I can't see how they could legally argue that they haven't lost institutional control to be honest with you. Neglect is almost as bad as intentionally taking the fraudulent action. They should be held accountable. Zees just need to stand up.