The Department of Justice announced today that several corporations acting as franchisees of Jackson Hewitt have been barred from operating in North Carolina, Illinois and Georgia. The government had alleged that the franchises “created and fostered a business environment in which fraudulent tax return preparation is encouraged and flourishes” in their complaint. One of the franchise owners was responsible for over 105,000 tax returns in 2006, making it one of Jackson Hewitt’s largest single franchises. Jackson Hewitt itself is one the nation’s largest tax preparation chains for individual taxpayers.
The injunction, subject to approval by local federal courts, will restrict the operations of franchisee corporations in the three states and limit activities in a fourth. IRS Acting Commissioner Linda Stiff praised the actions. “The actions announced today are in the best interest of the nation’s taxpayers. This effort helps to ensure that taxpayers receive quality assistance when they seek the services of a tax professional.”
The suits were the largest largest civil injunction enforcement against a tax-preparation firm when they were filed last April. Individual defendants were also named in the cases, and Farrukh Sohail, who owns either some or all of each corporation named, has been banned from preparing taxes in the United States for at least five years. Sohail could also be subject to permanent restrictions. Several other individual who the court found had repeatedly engaged in misconduct have been barred as well.
Tax Fraud has become such a prominent problem, even in well known franchises, that the Justice Department has a division devoted entirely to the problem. The Acting Assistant Attorney General for the Justice Department’s Tax Division, Richard T. Morrison, emphasized the Justice Department’s commitment to taking action against fraudulent tax preparers.
“The Justice Department is committed to taking vigorous action to ensure that tax preparers comply with the law,” said Morrison.
Tax return preparation fraud usually consists of promising inflated returns for the tax payer, and using improper methods for achieving them. Preparers often manipulate income information to qualify their clients for large tax credits, such as the Earned Income Tax Credit. While the taxpayer may have no knowledge of fraud being committed, when the IRS detects the fraud it is the taxpayer who must pay additional taxes, interest, and who could face penalties themselves.
Department of Justice, Corporations That Owned Jackson Hewitt Franchises in Three States Agree to Be Barred From Tax Return Preparation