US Government Sues Jackson Hewitt Alleging "Pervasive Fraud"

The US Government has filed “civil injunction suits against five corporations that operate Jackson Hewitt tax preparation franchises, as well as 24 individuals who manage or work at the franchises.” The suits allege that employees at 5 Jackson Hewitt franchisees committed pervasive fraud.

One example given in the IRS Press Release stated that a barber claimed a fuel tax credit for buying 25,000 gallons of gas for highway use. The IRS calculated that the customer would have had to drive “1,370 miles each day, seven days a week, to consume that much fuel in one year, leaving little if any time to cut hair.” Well, maybe he had one of those “Books on Wheels” trucks, but for hair. Ok, maybe not.

The lawsuits also claim that managers of the franchises in question received kickbacks from customers for helping them file fraudulent returns. In all, the government estimates the losses to the US Treasury at $70 million. The franchisees named in the suit are:

Chicago: Smart Tax, Inc., d/b/a Jackson Hewitt Tax Service; Ask Tax, Inc., d/b/a Jackson Hewitt Tax Service;

Atlanta: Smart Tax of Georgia, Inc., d/b/a Jackson Hewitt Tax Service;

Detroit: So Far, Inc., d/b/a Jackson Hewitt Tax Service; and

Raleigh: Smart Tax of North Carolina, Inc., d/b/a Jackson Hewitt Tax Service

They are all owned or partially owned by one franchisee, Farrukh Sohail. —MEGHANN MARCO

U.S. Government Sues Jackson Hewitt Tax Preparation Franchises in Four States, Alleging Pervasive Fraud [IRS]

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  1. grouse says:

    I anticipate Jackson Hewitt corporate’s response will be something along the lines of “I’m shocked, shocked to find that there’s tax fraud is going on in here.”

  2. Jesse McBesse says:

    I, rather stupidly, used them for my tax preparation this year. The lady who helped me was–I kid you not–high on either meth or crack (complete with teeth grinding and head bobbing). After discovering that I owed a decent-sized sum, she tried to talk me out of reporting my extra income from freelance work. I explained that the work was done for a church and a POLITICIAN and she still, almost emphatically, tried to get me not to report my earnings. I insisted and will NEVER use these crazies again. Only real accountants from now on…

  3. Alexander says:

    Last year I was between jobs and took a temp job at an independent Tax place in Los Angeles. It was clerical only and the most I did was input information to tax programs. Oh boy, I kind of knew there was some lying going on when it came to taxes but I never realized just how much. I would say that 8 out of 10 tax returns were full of lies. The most common lies were under-reporting of misc income (1099) and many false deductions. He reported deductions in just about every return. Non-existing charity and cash deductions and real deductions (such as miles for 1099) were padded heavily along with every other deduction. Even after the numbers were inputed, if the return was not favorable, he would go in a fudge the numbers even more until a more favorable number was reached. I was really speechless. I thought for sure this guy would get caught but lo and behold he has been in business for over 15 years and in the time I spend there maybe 3 out of thousands of people were audited. Every one always got their money. The cheating is blatant and arrogant at this point. Year in and year out this guy manipulates the system to his and the taxpayer’s unfair benefit to what seems non-existing consequences.

  4. mfergel says:

    The barber should tell the government he got the idea from Halliburton. That should get him off the hook as Halliburton hasn’t paid back the money they owe yet after being found guilty of overbilling.

  5. Roosh says:

    IRS is just trying to scare the middle class into not cheating.

  6. mac-phisto says:

    @Roosh: or trying to clean up shade-tree tax prepping which actually costs taxpayers millions of dollars every year.

    still can’t figure out why ppl aren’t doing them online yet…

  7. thrillhouse says:

    @mac-phisto:

    because there are, believe it or not, a lot of people who do not have a computer in their home, let alone an internet connection.

  8. Nemesis_Enforcer says:

    @mac-phisto: Too bad they can’t go after the rich bastards who pay little to none of thier taxes cause they use so many loopholes. While us Peasents have to pay a good chunk of our measley income to make up the difference.

  9. senioritis says:

    @omarb i dont actually have the link, but if you report tax cheats to the IRS you can receive up to 18% in recovered funds I believe. Report this guy to your local office and you’re gonna hit the freaking lottery

  10. Alexander says:

    @senioritis: Call me a cynic, but I always figured he would figure out a way to get out of it. He would probably blame his assistants or the tax payers themselves. The few times someone did get audited he completely threw those people under the bus placing all of the blame on them for lying to him.

  11. Timewalker says:

    (Comment audition)
    I have never paid for my tax prep. My Mom used a local tax preparer, and she did my taxes w/o my consent when I was still in college. I looked at what she had done and she had me owing the state (Missouri at the time). I said, “No thanks,” went back and figured it up myself and got both a federal and state refund. Ever since, I’ve been doing it myself. First with books like “Taxes for Dummies” (I needed it when I had moving expenses for a new job AND bought a new house AND had multiple state taxes in the same year.
    And ever since 2003, I’ve been using TaxAct. http://www.taxact.com It’s shareware that I actually pay for! (I know, shocked me too.)
    Anyway, they have always resulted in an accurate return, are inexpensive, have free e-file, and I get my refund in 2 weeks. Highly recommended.

  12. nlatimer says:

    Well while this is obviously fraud, I have heard of stylists who travel. Usually an RV and have deals with large corporations who prefer giving their employees cheaper haircuts instead of letting them take a day off. I recall hearing this story, however I can’t seem to find anything about it now unfortunately.

  13. mac-phisto says:

    @Nemesis_Enforcer: well, actually that’s where the AMT comes in. low & behold, AMT is starting to grab some traditionally middle-class families now.

    personally, i don’t care a whole lot about the rich man avoiding taxes. imho, at this time of the year we’re all in the same boat: me vs. the irs. i f they want to save money, just stop throwing billions of dollars at failing corporations, insurance bailouts, subsidizing agribusiness & tax breaks for foreign companies & assets.

  14. senioritis says:

    @omarb: if the IRS audits his work (and with your testimony most likely) i dont think he could get away with it. maybe once or twice, but if hes really done it for 15 years an auditor will notice that

  15. ColoradoShark says:

    @:

  16. ColoradoShark says:

    @grouse: Nah: They’ll say something like “we take this very seriously”.

  17. Teapotfox says:

    @nlatimer: I used to employ a woman who also did hair on the side. She would load all her hair appliances and hairdressing equipment in her car and drive to housing projects and other low-income neighbourhoods, providing her services there. Since she didn’t have to pay any salon a cut, she offered lower prices than most salons and really made some good money. It was a pretty lucrative side job. (Although yeah, I agree, this is obviously fraud.)

  18. IRSistherootofallevil says:

    Well the US government cheats us out of our retirements (cough cough social security cough cough), good public education, and other services we’re inherently entitled to, so it’s only fair if the cheating’s reciprocal. If the IRS bitches and moans about taxpayers cheating on their taxes, we’ll just point out the fact that the Defense Department cheats on their accounting too. Not to mention Donald Rumsfeld lost track of $2.3 TRILLION in the Pentagon. Besides, federal taxes go to paying congressmen that don’t represent us, a president who’s only interested in lining the pockets of Halliburton, government waste (lack of accounting oversight) and interests on government bonds from the national debt, about half of which George Bush accumulated. Since THEY’RE wasting our money, and cheating us out of our rights (free speech, habeas corpus, right to a fair and speedy trial etc etc) we have the right to withhold taxes from them.

    This is the reason I’m against a monopoly in any industry, including government. If everyone refused to pay the income tax, what’s the IRS going to do, search everyone’s house? They don’t have the guts, or the human resources, to search 100 million households, or imprison 150 million people. If they did, the ACLU and Amnesty International would raise all hell like no other.