LIBERTY TAX SERVICE Franchise Complaints

5,730 thoughts on “LIBERTY TAX SERVICE Franchise Complaints”

• Read H&R blocks report. Block planning to have free return prep for some customers. Competition from everywhere and shrinking retail tax market. That’s their explanation.

• I believe the PATH ACT will have a greater impact on the early season clients than most companies are saying. It maybe 2018 before it really hits as most people won’t pay attention to what it means to them until their money doesn’t show for 30-60 days later than they planned. Real time matching is a whole other story and to what extent and fashion it will be used. Block is playing the deeper pocketed game and will win at the expense of LTS and etc. They have all but ignored/lost this market for about 6 years but will be fighting for it vigorously again going forward. All branded retail has had a hard couple of years but it appears the kool aid machine in running out along with the clock on this travesty. I don’t expect smooth sailing for anyone next year but expect another shoe to drop.

• Just looked at the 2nd qtr. results for Liberty Tax. All the numbers are down. The company’s balance sheet shows receivables continue to clime indicative of the franchises not being able to pay. Over all liabilities are up compared to this time last year by $5,7M mainly due to borrowing on the credit line.

  On the income statement franchise fees are $364,000 compared to $906,000 last year. According to the financials the company only sold 50 franchises this year compared to 142 franchises last year.

  Cash flow statement shows company continues to book a loss on bargain purchases and sales of company owned offices. Operating loans to franchises are down by 2.4 million. The company paid $5.6 m to purchase AD rights and company owned offices. This was offset by the sale of securities which brought in $5,m. The company borrowed $66,809 from it’s credit line and paid out $4.4m in dividends.

  So here is a company with falling revenue, buying out AD’s and company offices to keep the business up and running, but because of cash flow issues it can provide the same amount financing to franchisees as it has in the past most likely meaning more failed franchises. The stock price has fallen drastically so large stock sales to generate equity is unlikely and debt is increasing. Base on this trend you wonder when the credit line will be lowered and or the interest on the debt raised. If I was the lender I would be putting a clause in any new financing restricting the company from paying dividends.

• What is even funnier, listen to the conference call and how Screwem, dances around the IRS problems by saying “compliance” etc. when he is talking about the very few offices that were closed down! He also seems to imply that this is an industry wide problem not just a Liberty Tax problem, please correct me if I am wrong but there were MANY, MANY LIBERTY TAX OFFICES CLOSED DOWN FOR PREPARING FRAUDULENT TAX RETURNS, how many Block and Jackson Hewitt offices were closed????????? At least now SCREWME has to acknowledge the problem but for now he continues to dance around it and shrug it off as it is a mesquito, but I bet this mesquito is sucking lots of blood! hahahahahahahahahahahahahahahahahahahahahaahahahahahahahahaahahahahahah!!!

• T. EA – agree. Next year will show the real impact. Definately real time matching is another story. Some of that story will be told this year when many EIC filers get a letter for more information or incomplete returns, instead of a timely refund. We all know the IRS does’nt handle new things well.
  Obviously the big wigs have a lot more info than we do.
  HR Block’s leader resigned effective December 30th. Looks like they are going into tax season with a new leader.
  Store front retailers will continue to be pushed down and out. Means one season at a time and don’t count on equity in your store unless you diversify.

• ^^Diversify as in ‘Siempre Tax’?? (!) I do agree with that, though, especially if you are on your own, which I hope you would be after years of posts on this website bashing this ridiculously awful franchise.

  Bill: Thanks for numbers information. I am THRILLED that they are doing worse financially. They deserve every negative feedback, review or nasty news articles that come their way.

  Still puzzles me how 50 franchises can be sold despite our best efforts :(

• Fees, Fees, and more fees! Liberty zees look at how much corporate sticks you with. HR Block cut expenses last quarter. Liberty increased all expenses paid to corporate employees General administrative and selling expenses. The only thing they cut was marketing expenses by nearly 40%. Check out Q2 LIBERTY Results vs. HR Block. This company is sinking fast! You better get a life vest now!!

• quest: I wouldn’t read to much into the Gregory leaving I would say it has more to do with CFO roll of last several year and investment world than season outlook. I have my opinion but no facts it’s a non event Block is like any other SP 500 component people come and go based upon many factors that have nothing to do with larger picture. Tax Season is just around the corner….hold onto your butts…it’s going to be a ride.

• Ba Humbug
  Tis the Season for rats & sharks that will overwhelm you with smoking mirrors and fake marketing to get you to buy into this company. Don’t do it. Whatever territories have been purchased this year, I’m so sorry for them.

  At this point, even a life jacket won’t help. They are artificially propping up their own company by buying back territories from franchisees & AD’s……….who’s running all the offices around the country? JTH himself? Oh wait, he’s never done a tax return in his life :( He just makes potential franchisees ‘think’ he knows what he’s talking about….he’s a marketing guy & a rip-off artist, not a ‘grandfather’ of tax.

  Thank goodness all the numbers are down, as they should be. Good, we are doing our job. He needs to go away for a looooonnnnnnng time. :(

• Liberty Loves Usary!!! $49.95 for an ERC Franchisee keeps Zero! Borrow from them with a new Early Season Financing program pay 2% to borrow 50% of net fees no matter if you borrow it for 2 days or 2 weeks! So you borrow $10000 for a day it costs you $200 bucks! On returns the IRS accepts a loan company floats the loan and Liberty pockets the difference!! Wow!! Liberty is encouraging a new check fee that they keep 50% of the additional processing fee. 50% of a new check processing fee is kept to fund Big John’s bottom line. This is hilarious because Big John already keeps the $49.95 processing fee!! Buyer Beware! Usuary, Greedy Loan Sharks at their best!!

• Receivables financing is available to mom and pop offices. The program is not unique to Liberty. Google it. The bank charges 2%. Program was available to mom and pops last year. Too bad it’s not directly available from the bank. Independents get their own money without third party.

• I understand that the Feds are about to indict Hewitt and Liberty in California and Illinois. Has anyone else heard of this?

• Texastee – No… tell more… reliable source? Would be a great late Christmas present to us all. Heard rumors for a while but nothing from a solid in the know direct source.

• I’m not sure, either. Its just a persistent rumor. Seems awfully quiet out there regarding the IRS. They are probably awaiting the change in administrations before something happens. It gives them a longer holiday vacation anyway, to the inauguration. We’ll see.

• This is the worst type of Franchise to get involved with. They play dirty. It’s not enough that you lose all your $ and the shirt off your back. They keep coming at you until you are squashed into the ground. This is a fact, not an opinion. I’ve seen it happen to several ex-franchisees over the years. They hunt you down and crush you again & again. There is a reason the new franchisees signing up each year are dwindling. Hopefully prospective franchisees and the paying public are finally getting in-tune with the fraudulent behavior of the CEO and his “top” cohorts. It is SO not worth it. Losing money is one thing, but when you think about all the stress THEY cause and the ability they have to do so much harm to you, your family, your future and your reputation, then it really is SO not worth it. They do not care one iota about you, the franchisee. Some franchises may, but this one does not AT ALL. They are dirty, rotten scoundrels who have nothing better to do then sit on their perches devising ways to get back at people that have ‘wronged’ them. They play dirty, are dirty and are evil. Stay away.

• I laugh now, but when JTH and his merry burglers sent me my first email about not hitting my numbers two weeks after I was supposed to be open (early January), I of course got annoyed. I have now driven by 6 Liberty Tax locations in my area, and none are open. Most are not opening now until they can actually submit a return. Had I realized then what I know now, I would not have lost $100K in this worthless business adventure. Open early, pay people to sit there while they played solitaire on my internet for hours on end, and lose, lose, lose money. All the while paying huge rents for the storefront they forced me to select as it would guarantee me better results. I keep hoping that anyone reading this will stay far, far away from this band of thieves. It is a horrible investment.

• F & D:
  How right you are. Those damn ‘notices to cure’ for any reason under the sun…….and I was a franchisee that always had my offices in the top numbers. Then they would audit me just to bust my chops. Don’t even get me started :(
  The BEST thing I did was leave there. The stress was overwhelming. That was the most useless franchise on the planet. You are left alone to figure out everything on your own, and I can’t even imagine people starting this without a Tax background. My computer used to, without fail, crash at the height of Tax season………why? It was filled with their spyware! :(
  Their Tax books, their promotional garbage were always 10,000 times more $$ than anywhere else. This is a marketing company, not a tax prep company. They sure know how to get you to part with your money. But when you need the help desk, they are not there. Or they used to not be there. Have no idea anymore what they do now, thank goodness. I picked my site locations better than anyone else ever could. Usually they were from another state altogether, telling me where I should open each store. NOT. Not sure how many times we can write the same here before people really listen. There should be NO new offices opening next year—–none. Then we know we are doing our job.

• 5 years after graduating law school, I decided to make the switch from pursuing a legal career, to go into Tax and Financial Services instead-I like being able to use my analytical skills, ability to comprehend legalese, and distill it to clients in plain English.

  I’m currently in my second year as a Tax Preparer, and I’m fortunate that the franchisee who taught my tax school, taught us above and beyond what is in those three volumes. He basically took the same breadth of knowledge that was covered in my Law School course Federal Income Taxation, had us doing practice problems in each chapter, and then giving us practice tips and advice about how the IRS team of auditors and investigators treat different issues that arise. We learned how to do Schedule C Reconstruction, and had the Due Diligence Requirements for EITC and other Refudnable Tax Credits drilled into our heads constantly. The knowledge I obtained in that office, helped me see just how ridiculously sloppy the other franchisees are, as the second Liberty office I worked at in my first season did not have an experienced Tax Person as the franchisee.

  After assessing my colleagues in that office who had gone to other liberty tax schools, I quickly realized that I needed to not let anything slide on my watch if I didn’t want my reputation and professional moral character to have any stains. That first month in my second office, the employee team meetings involved me pulling my hair out as the buffoons failed to grasp what couldn’t and couldn’t be done. I don’t regret being a jerk and positioning myself to the point where I forced 3 other tax preparers to quit: one of them didn’t seem to value time and always had an attitude, another one who had several years experience didn’t like the fact I wouldn’t let things slide in schedule c, college credit, EITC due diligence, and filing status-come to find out after she quit, she actually tried to convince one of my clients that she could use her student loan repayment documents (been out of school for 5-10 years) to claim Education Credits. The third tax Preparer I got to quit was a smooth talker that had no idea what he was doing when it came to taking his general knowledge of taxes and actually understanding how the book knowledge and worksheets interplay, and how to keep track of what he’s doing. From his own admission, his Liberty Tax tax School pre-screened him as not to be hired so they basically let him hang himself, and gave him minimal lab hours and minimal computer time. He threatened legal action so they placed him at my second office. The rate at which he ate bags of complementary potato chips vs tax returns completed without errors under his name, was in favor of the potato chips.

  Here’s the run down of the most common fraudulent practices at the shutdown liberties in my area. Fake Schedule Cs for W2 Individuals too boost EITC when their withholdings were of a lower bracket than their income. Fake Education Credits. Filing married couples as MFS and HOH when both spouses lived together all year (Liberty Corporate overruled me in one instance where I attempted to tell a client she and her husband couldn’t do it and backed up my claim with IRS literature) Using Schedule C to write off child support payments as net self employment business losses. The best one was a client with Schedule A deductions having half of his deductions thrown on Schedule C as self employment expenses (he had no self employment income only W2) all so the fact he his wife and 2 kids didn’t have health insurance for 12 months wouldn’t result in the pentalty taking significantly reducing his refund (which combined with Federal and State was still a lot). This of course doesn’t even address the fact that several Zees created ghost libtax accounts where the actual fee was significantly higher than the one quoted. We figured this out when we had to amend tax returns from the shut down liberties and noticed the insane fees being charged but not including any detailed fee breakdown even if the return was uploaded under an account with processing rights. There’s were Zees who would encourage Tax Preparers to process returns that were initially started as estimates against the client’s wishes (that happened to a client of mine). Even better was the system under one of the Zees where after the Client’S refund check was written as a personal check to avoid them seeing the gimmickry done on their bank printed refund check-the differences pocketed by the Preparers.

  Now fast forward to my first weekend of P&P training this season at the third Liberty Office that I’ve added to my work schedule. One of my colleagues who worked at the shutdown liberties, somehow avoided the blacklist, and copped to the fact they were trained to do everything I just mentioned above. Someone like her, who parlayed Liberty into working with CPA should not be allowed to do tax work-she obviously knew what she was doing is wrong. I can’t wait to see how she performs this season. Additionally, here’s what else I’m finding to be a joke. First the NetSpend Card. Clients can go to Chase Bank, and get a similar type of debit card, and not get bilked out of fees the way Met Bank’s NetSpend Card does. Additionally, as someone who is highly bankable, and gets zero fee checking and savings accounts, why the hell would I ever agree to have commission from pushing NetSpend on a client also put on a highway robbery debit card? If I wouldn’t encourage my non bankable clients to get NetSpend, why the hell would I agree to it myself? Second, it is against the law in my State (and possibly federal) to charge a fee to clients to print refund checks in the office, yet I’ve heard from clients that at least handful of other offices have made it a policy to do it, while playing it off as “going green.” Third, not sending clients home with their paperwork (which includes a copy of their tax return) the same day as their tax return being completed is against Federal Law. Yet Corporate encourages this practice, which is being followed by many offices. Fourth, the quality of tax school significantly varies from franchise to franchise. Tax School is officially taught by pencil and paper, yet we file tax returns electronically. Students need to know the material but they also need to know how to do tax returns the same way they will do them when tax season starts. You still need to know what is happening on the work sheets, when they are needed, where to enter items, and explain what is going on. If you don’t know that, it doesn’t matter if you do tax School problems by hand or on the computer, you will be terrible at this job. On the other hand, if you don’t get computer time, and you still understand what you’re doing, you are going to be painfully frustrated when doing these in real time without significant practice, our clients will get increasingly frustrated, and that Preparer will lose out on commission, scheduling opportunities as tax season progresses. All this brings me to my Fifth point, every Franchisee must have at least a Legal Background. I find the ones I meet who are just “business and marketing guys” down play how serious the work that we do actually is.

  Before my 2nd year even ends, I’ve already decided that when I’m comfortable enough to open up my own tax office, I’m going solo, or partnering up with another solo practitioner. Not a chance in hell I’I franchising. I save on the franchise fee, I don’t have to pay franchise royalties on bankproduct to JTH Financial (I also pay a lower fee to banks like First Republic), I have a multitude of software options, I have freedom to market how I please without some yuppie Area Developer whose really just another Zee playing either the role of Hall of Monitor or laid back absentee fee collector. Moreover, I don’t have to go broke engaging in gimmicks like giving out $50s CIF just to get business when by actually abiding by the Customer Guarantee, I can build up word of mouth marketing. I don’t have to worry about having shutdown Zees being held up as exemplary Zees to follow if you want to make money. I don’t need to hear John Hewitt bitch about ObamaCare in conference calls while being giddy about the business opportunity it presents for every Zee (an opportunity to get licensed to sell life insurance and help their clients plan for future years and save on their tax liability) in the corporate magazine.

  One other thing, the liberties that were shutdown near my offices, have all been re-opened by either corporate or a new franchisee, and because these offices did a terrible job recruiting for tax school, they had to bring back the blacklisted Tax Preparers.

• Right now I’m feeling sorry for the franchisee and your clients. You must be in Virginia Beach, where there are almost record snow levels. Lots of snow will make you antsy. Just take a break. Pay more attention to HRBlock and Jackson Hewitt. All are the same this year.

• The problem with Liberty is the lack of uniformity in how tax school is taught, and the fact the IRS imposes no hoops on people to obtain a PTIN and EFIN. Just think how much worse things would be if California Tax Education Council didn’t require Tax Preparers to be bonded, and rigorously educated. I’m also surprised more shennanigans don’t take place outside of California.

• If ur still in the system and want to screw him over a little. This is what I heard some people do. ? On cash paying customers input refunds and if u do CIF input u gave $100 even if u only give $50.

• Very few end up being successful with Liberty. The fees alone they charge just for being a franchise is enough to run from this company, but then add to that the financing charges so many franchisees ending up needing because they either struggled there first year or so or they expanded, will doom the vast majority. Liberty Franchise is only concerned with one thing and that is their income. They want franchisees to have just enough hope to continue year after year but a majority of franchisees I have know throughout the years either go broke, walk away nearly bankrupt or make just enough profit to justify trying another year. Do yourself a huge favor and if you are not competent enough to go out and research and create your own system and open your own business then going to a franchise like Liberty or others will not help you, it will more than likely bankrupt you.

  The other thing to consider is because of the fees and possible financing charges along with normal expenses, many franchisees are stuck between a rock and a hard place. So when it comes to fraud it becomes very easy for many franchisees find it difficult to impossible to turn down fraudulent returns or returns that are questionable. When it comes to surviving or not surviving people will do some things they normally would of never considered. Understand the tax preparer and the franchisee will be on the hook for everything and If anyone has criminal charges filed against them it’s not going to be Corporate it’s going to be you and the preparer. And even if Liberty does get in trouble they have the legal team and finances to take care of it while most tax preparers and Franchisees are barely surviving. They will use all the money they have made off of franchisees to protect themselves and don’t fool yourself I to believing they will protect you. Fact is if there is any trouble they will quickly offer to make the noose for your execution. If they have to choose to protect you and risk the chance of bearing some responsibility or joining the IRS in the attack against you , they usually will not spend a second thinking about it and join the IRS Attack.

  There’s enough info on here that anyone with some sense can figure out that at the best your in for a difficult time if you decide to purchase this franchise. If you tell yourself that all these posts are just the people not talented enough to make it that’s your call but I can tell you that I have watched many talented sucdesful individuals fail miserably when before Liberty they had nothing but success in business. Where there’s smoke there is usually fire and there is a ton of smoke and the fire will start blazing sooner or later they can’t keep putting out this many fires forever.

  We are getting ready to enter one of the biggest small business booms ever. Take the time and educate yourself, get your finances in order, create a working business system and go out and build your business without wasting a huge percent of your capital on a franchise. All the information you need is out there to create your own system and it doesn’t cost you anything if you will do your research.

• What is even sadder than the way Liberty has treated there Franchisees is the fact that the IRS and DOJ rarely go after these large franchisors when it comes to industry fraud or problems. Yes they Finaly did shut download On Tax Franchisor with decent size but in this world of compliance and enforcement the IRS and DOJ has determined not to make the tax filer criminally responsible for their fraud and they won’t hold these large franchisors whose systems and financial burdens placed on Franchisees have created in many instances this fraud.

  The IRS and DOJ instead partner with franchisors like Liberty and the Franchisors give the IRS and DOJ sacrifices in the form of Franchisees and Tax Preparers, to keep the Gods Happy and Fed! Never once do you hear the Franchisor like Liberty take any blame or respinsibility at all. They blame the crooked preparer and the Unethical Franchisee who in most cases is struggling just to make it. Most the time the Franchisee that is charged with fraud is not rolling in the money, most the time they are a financial disaster and most the time Liberty has a lot to do with that disaster.

  Also if you look the IRS and DOJ they go after independent tax offices in addition to Franchisees because they do not have the resources to protect themselves either and they are easy targets. Your large Franchisors have teams of lawyers who can make the IRS and DOJ lives miserable, So the ones that should be gone after to correct these tax fraud issues are left untouched. Liberty is Finaly paying the price in the form of lost Franchisee sales and growth but the individuals who created this company are not struggling or having any financial issues themselves at all because they are set for life. Be careful because your life can be turned on its head if you decide to join Liberty, not only are you risking your financial security you are risking your reputation and possible prosecution and jail time if you are ever targeted by IRS /DOJ.

  Before getting in this industry you need to be aware what your entering. Yes there’s huge opportunity in this field and quite a bit of money can be made. But targeting low income as your primary source of revenue and that is Libertys system, no matter what they say, and dealing with all the fraud from the consumer side that naturally comes with this group of clients in addition the total responsibility for each return prepared by you and your preparers while paying large fees and Interest to Liberty isn’t a recipe for success. Plus what does all those fees and interest payments your paying get you? Not protection and not the backing of the franchisor when it comes to the IRS and DOJ. I can tell you that a good percentage of your fees will go to the teams of lawyers that will protect Liberty Corp. And not you instead it protects Liberty Corp from you and that protect them from IRS/DOJ. In addition it acts as a deterent so it doesn’t make financial sense for IRS/DOJ or anyone else to go after them.

• ^^^BINGO!!! Well said!!!

• The fact that Liberty turns in its own franchisees (once the heat is on) corroborates everything you said about whose interest they are protecting. Interesting that Block, whose stores are mostly company owned, doesn’t have these constant problems because they care about their reputation. Liberty doesn’t have much of a reputation to care about so they overlook the fraud until it becomes too obvious and then squeals on their own team.

• Sara you are correct. H&R Block has went through there own issues but they were years ago. The issue with Liberty really stems from what happened with John and Jackson Hewitt and him getting let go after the company went public. Johns desire to be number 1 And to be completely in control created the atmosphere and situations at Liberty.

  He swore no one would ever take control of Liberty away from him when he started Liberty Tax and that also included franchisees. This is why it’s very difficult for succesful franchisees to remain successfull with Liberty because they quickly become targets of Corp. For being too influential. The system is flawed in so many areas but 99 percent of the flaws result from Libertys original business plan and that is making money off of financing and there ability to gurantee repayment with capturing bank payments from the early season. Along with there goal to grow as quick as they possibly could.

  As far as tax prep fraud issues that’s a combination of focusing all your efforts on early season along with the fact that it is very hard to become profitable quick enough not to need financing from Liberty just to stay open. Once the financing starts it’s a downhill journey that many never recover from. Quickly franchisees become desperate and desperate franchisees trying to repay Liberty short term loans with high interest rates so they can bank enough dollars just to get to the end of the tax season. Liberty system quickly places you in a viscous cycle that will drive you insane where you never have enough money coming in to keep the doors open. So many franchisees are trying to get as many returns as they possibly can and it becomes hard for many to turn down returns.

  There are franchisees that just flat out become crooked and are willing to commit fraud no matter what. But there are many that the situation they are placed in helps push them over the edge to doing it.

• A good Liberty soap opera involving a franchisee and Hewitt. So far, Liberty is on the hook for $2.7M, but they will appeal:

  http://pilotonline.com/business/liberty-tax-loses-million-breach-of-contract-case-with-former/article_5ddb6355-a6c3-50c6-9274-e48cb097b56f.html

• ^^^Excellent, Dr. Zhivago. “To quote a Liberty Lawyer: “Liberty prides itself on doing the right thing”.
  Um, NO. Not even close. It makes me want to vomit what they do to franchisees, ex & current. I really didn’t think anyone could win anything in Virginia against Liberty. Thank goodness for the only Judge that hasn’t been paid off yet. And Hewitt wasn’t there. What an ass. Goes to show he’s got a mightier than thou attitude. Excellent! I hope this case makes many more people comfortable with filing lawsuits against this incredibly one sided business concept.

  ^^Out: many little franchisees were taught how to maximize the schedule C’s and commit fraud. In some cases it was huge numbers and in some cases quite small numbers. Liberty was going to turn everyone in regardless, so they looked like the hero. How else would all these franchisees know to do this? Especially the ones with no tax background? Liberty then looks like the hero and then says” Liberty prides itself in doing the right thing”. These things were taught after hours after tax schools in Virginia. For years. So many ex franchisees know this. The DOJ knows this too.

• What is finally coming to surface is that Liberty knowingly trained its franchisees on how to cheat the government via EIC and Schedule C construction. What is not known is how rampant this practice is within Liberty. In order for us to make our payments to Liberty, we are compelled to be overly aggressive in the preparation of tax returns to justify the higher fees charged to the poor client. Liberty consciously and probably viciously had the intention of modeling the system this way. Everybody hates the government, so why not get your piece of the handout?- This is Liberty’s philosophy and it plays well into the entitlement mindset of some people.

  As for other items of interest, it is true that the moment you dare question anything that corporate does, you are banned from the internal message boards. Liberty is in cahoots with the IRS in squealing on its franchisees on the very things they instructed us to do. Who gets in trouble for that? Not Liberty, but the franchisee. I do think that if the DOJ was not so politicized, they might actually see who the real tax culprits are: and that is definitely Liberty Tax. DOJ, go after the big boys for once!

• Texastee – You are correct! All the new President has to do is deflate the money out of the EIC, which this year it is much more stringent for anyone to qualify for and the delay in refunds helps slow down the fraud. If your W-2 does not match, then your money is held until the computer can match the forms to your tax return.

• Liberty Tax is done in Maryland. John Hewitt decided to not put any money into the Maryland issue because of fear it would expose all the fraud he encouraged! Most little franchisees were put out of business by the bad publicity last year. The bigger ones were able to last another year but are a skeleton of what they were before the suspensions. Not sure what their plan is, but my guess they will either be banned from doing business in Maryland or voluntarily pull out. Sad, how all the honest franchisees got screwed by a few bad ones and by John Hewitt.

• I think all the franchisees should hold Hewitt responsible for the bad press. After all, it is under the Liberty system that all this fraud occurred. I feel bad for all the current franchisees, but we all knew that this was coming! A good exit strategy might be to have a class action suit against Liberty due to breach of contract by teaching fraudulent methods of tax preparation to franchisees. This is further perpetrated by the Corporate pressure of assessing large fees on the Franchisees. I know that there is a clause in the franchise agreement about no class actions, but if Liberty had the intent of committing fraud, would this clause not be thrown out? I’m not a lawyer, but it does seem unfair that the franchisees trusted Liberty to develop and guide their businesses to be profitable under the “Liberty System”. Something is not right and perhaps Liberty corporate should be investigated a little more enthusiastically.

• Liberty was built to succeed by taking advantage of the lower income populations need for immediate money and on entrepreneurs starting out with limited cash resources and a need for capital and a burning desire to be successful. Liberty took advantage of both markets for a number of years but now they have come near the end of the road. I believe the first market is going to dwindle more and more as time goes on. The IRS and DOJ lack of desire to go after the big fish in the pond and instead focus on the tiny fish will give Liberty some time and opportunity to change the business model they have run on up to this point. But transforming from a Company that targets the desperation of the lower income to a Company that provides professional serivces will not be an easy one. The other major problem is convincing anyone with any sense and the ability to do basic research to spend the capital they have available to them on a Franchise Fee and then pay high royalties and Advertising fees will be a gigantic challenge. Yes the Franchise gives them name recognition which at this point is negative recognition and it does give new franchisees a system of doing business but that system has become known for not producing the results needed to succeed in the vast majority of cases so selling a Liberty Franchise is going to be a massive uphill battle unless Liberty goes through a major overhaul and change in business philosophy.

  At present the majority of Liberty Tax Franchise Offices have been opened and staffed with the low income as the primary target customer which means the offices are located in areas where switching over to any kind of real Professional Type Services will be difficult not to mention the reputation that Liberty now has as a low income payday advance type of business is real and accurate in so many cases. Offiering professional type services requires training and time to get employees experienced offering such services. For existing Franchise Owners this will be a massive mountain to climb since most are barely surviving and many know that selling the offices they own presently is near impossible and many do not have time on there side. Many franchisees are barely just making it into the next year and they never know if they will be able to survive another year or not. Then the franchisees anywhere close to the offices that were shut down for tax fraud have a near impossible job of trying to overcome the negative public opinion that Liberty now has in those areas.

  So either Liberty clings to the past and remains confident that the lower income will always be in desperation and that they will be able to find and fund services that targets that desperation otherwise Liberty will have to change the system. What they have found already is that new prospective franchisees are choosing not to go with Liberty and under current circumstances I think that will continue.

  I believe Liberty will continue to focus on what got them to this point and attempt to start adding more Proffesional types of services that may attract new filers and that may attract new potential franchisees. But it will not be easy and the failure rate amongst existing franchisees Will continue to grow. I could be wrong and John could bring in the necessary talent at the Corp level to dramatically change Libertys focus in a way that helps existing franchisees grow cash flow or at least get to positive cash flow period. Over the next 8 years this country is set to experience mind blowing change and it will take someone with vision to provide what services will be in the greatest demand during this period of time. Desperate customers will always be around but I believe that Market is shrinking quickly as is potential franchisees willing to pay high Franchise Price when they can use that money to grow a non Franchise Operation and see profitability and positive cash flow relatively quickly compared to Liberty Model.

  From my understanding, John is stuck at the President and CEO for an indefinite period of time since the credit facilities would cut the credit line significantly if he ever decided to retire or step down. Without the credit facilities making the credit line available many franchisees would have no hope of surviving another year. Sooner or later I believe he will sell his stake in Liberty and take the profits he has made and run. Soon as he sees that he will never be able to see the day that Liberty equals or surpasses Block. HR Block is not in a great position as far as growing either but they have a solid diverse book of clientelle and not just early season desperate filers. HR Block can change and add services a ton easier than Liberty. I believe Johns vision of surpassing HR Block is the only thing that has kept Him going up too this point and when that is dashed he will leave.

• Liberty is done. You got Bablu, John Balki, Vanessa Dickens, Annie Fuller, Steve Deletsky, Detroit, Las Vegas, South Carolina, Florida. All arrested in last year. The honest ones are getting screwed by bad publicity.

• Screwed by corporate. Are you sure the all the people you mentioned above got arrested last year ?. I was with one of them this year.

• Don’t forget Maryland.

• I never heard Steve Doletzky being arrested. My understanding that Liberty parted ways with Steve in 2014. I read where they sold him the Unified Partners Businees or I am betting they traded him his Dmas and offices for his right to keep it. Which would not b surprising with Libertys history of pumping and dumping top franchisees and ADs. The key with all of this is Liberty having enough money to get away with most things at present and if you are a franchisee you have little not no hope of anyone ever protecting you. I know Steve like many of their franchisees that they hold up as amazing success stories was given credit for many things that he was not responsible for. I also believe that Steves training that Corp pushed everyone to attend probably encouraged offices like in Maryland to commit fraud and encouraged franchisees to push aggressive marketing including but never telling them directly , illegal activities. It might not of been giving them the exact scam but one that encouraged anything to succeed training. The people they pump and dump are never as successful as they say primarily because Corp ensures it and John ensures no one gets too big or has to much pull over franchisees so he ensures their demise happens quickly and effectively when he thinks They have become too big. So one leaves and another one has his or her meteoric rise.

  It will be interesting to look at the numbers this year. Liberty holds a great deal of responsibility for the early season tax delays this year and I am wondering if consumers will figure this out and go elsewhere.

• Out:

  I agree but giving LTS that much credit for delays is greatly over estimating the size and importance that LTS has in the overall industry. I’m sure it was a factor but self prepared, ghost prepares, LTS and .etc would be my estimation on the level of influence with it heavily leaning to self prepared.

• The numbers don’t support your premise. Study has shown 75 percent of EITC filers use a paid Preparer while 25 percent self prepares their own returns. The error rate percentage of self prepared returns was slightly lower than that of the majority that uses Paid Preparers. I’m not saying Liberty was only reason for the delay but the fraud discovered at Liberty offices last year did play a role.

• I recall that data and I believe that was before ACA and EITC Due Diligence which has had a massive impact on the retail market the last several years. Would be curious what the numbers look like last year.

• Roger:
  “Third, not sending clients home with their paperwork (which includes a copy of their tax return) the same day as their tax return being completed is against Federal Law.”

  — Do you have a source for that? I’ve worked for several CPA firms and none of them have given clients copies of their returns until after 8879s were signed and returns were paid for. Even then, sometimes assembly of returns could take a couple days from when they were accepted. I’d hate to think we we’re breaking the law each time.

  Circular 230 discusses “records of the client” which must be returned at the request of the taxpayer. That term specifically exempts any returns though.

  Pub 1345 states that the ERO “must provide a complete copy of the return to the taxpayer.” Though it doesn’t specify when.

  -Thanks for your help on this matter.

• I just have been talking to a couple of IRS examiners from NY and TX. They said that there is an internal memo and instructional presentation that specifically targets Liberty Tax franchises and how they conduct business. At least in those states and possibly FL, there will be more undercover CIB officers in the field to check out the abuses that Liberty has conducted regarding EIC and schedule C filings. This is from an internal source located in the NY area.

• Nate, you can’t ask a client to sign a return they haven’t seen yet. So yes, they should be presented with a copy before the efile docs are signed. If they have to come back to the office to pick up the assembled return, that is when they should sign. Sometimes I will email clients their return for their review, they send the signed docs back, and then come in at their convenience to pick up a printed copy–but at least they’ve seen it before signing. And that is when they get their paperwork back. It is against the law to keep their paperwork (like for a client who decides not to file with you), but completed clients should get their papers back at some point–law doesn’t say when, just that you can’t withhold it.

  It can’t be against the law not to give the client a copy the same day the return is completed. I do loads of returns for clients who drop off or mail me their docs. When I finish the return I call them and sometimes they don’t show up for a week.

• Nate you must give the client a copy of what they signed which is 8879 but there is no such requirement I know of that requires you to give a client a copy of a tax return prior to the IRS accepting the return. I think the argument here though is created when you are doing basic EiC returns or bank product type of returns and not traditional tax client returns that do not utilize bank products to pay for their returns.

  I know with my traditional tax clients I do whichever is more convenient to the client for the most part. If there is a question of if the return is going to be accepted or rejected I normally hold off giving out their copies until the return is accepted if there is no questions on the return being accepted or rejected then I will go ahead and hand the return out if paid for at the time it is prepared. The only times I have ran into questions of copies being handed out is when bank customers which normally are attempting to pull a fast one and they know the return will never be paid for. The simplest solution to that is not focus your business around those clientele and focus on traditional non bank clientelle.

• Don’t forget to give them that $50 bill as you you charge em, 100’s and 100’s of bucks for that simple return…oh and if they are homeless…..:)

• https://www.nytimes.com/2017/02/01/technology/ibm-watson-tax-return.html?smid=fb-share&_r=0

• With MEF, you can get an acceptance within a couple of minutes. I normally ask them to wait and spend that time talking to them (building greater relationships.) You can then print, assemble and hand the return to the non-bank client.

• T.EA:

  Thank you for posting that. I worked at IBM for @ 6 years when I first graduated. Fabulous company then and now. Talk about professionalism.

  I hope the collaboration with H & R is huge and successful and that Watson does do a faster return and guess what? A more accurate return, perhaps? Without any Schedule C fraud? Hmmm, wonder if JTH will install spyware into Watson. Maybe put these small places like LTS out of business for good?!!

  I have been on this site for years telling not only the tragedy of getting involved with this “company” but also with it’s “founder”, y’know ‘him’. I hope H & R takes him down & squashes the hell out of him they way ‘he’ has done to so many of us for years. If there is ONE new office opening up again next year, we still have not done our job well enough.

  There are not enough hours in the day to re-tell all the horrific things I’ve learned & heard about over the years with this company. Yeah, this is the ‘grown up’ big leagues. As rotten as it gets.
  Back away & run!

• You have to be a little bit ‘challenged’ to agree to teach ‘Watson’ how to prepare returns. There are over 700,000 tax preparers registered with the IRS. It’s so easy to forget that machines don’t buy houses, cars, or start small businesses. Eventually, tax prep will be simplified, but what’s the rush? Good jobs for our young people, not machines to replace them. A well-trained tax professional can make a good salary.

• Good one Mike. The 50 dollars cash thing was the best marketing idea ever to hit the tax industry but also the worst one to hit the industry. If you are going to base your business model based on the desperation of the poorest in our country you had better make your money quick and have an exit plan. Because the government will almost as always step in at some point and try to protect these consumers and stop anything that is popular and working. Unfortunately the only person or persons to profit in Liberty on this class of business was liberty and now the party is almost over. Sure they will milk the low income market and franchisees for as long as they can but franchisees have never gotten rich or made a ton of money off the poor it was Liberty.

  Pretty ingenious if you look at it. Put franchisees out on the front line. Have them do all the dirty work and take the risk doing business with this segment of business. Then ensure you have your entire franchise system designed to capture the vast majority of any profits made by royalties, advertising fees, expansion programs designed to grow office count and more importantly to keep a high percentage of franchisees in debt with high interest rate short term loans with little risk. Then design a Area Developer system that gets you free sales and support staff for years doing the same type of short term financing high interest rate loans that ensures that Liberty never has to give away half of there income By contract to ADs that purchased DMAs. Look at some annual reports and look at how they try to explain to investors the income the system states should go to Area Developers but vast majority never is paid out to them. Yes Libertys DMA contracts if ever paid off are amazing contracts and are a industry best but very few ever was able to be paid off before foreclosure. No accident there, this is the key to Liberts success.

  If anyone ever investigated how Liberty from its inception sold DMAs to people and look at the amount of Area Developers who actually ever made a physical dime off of being an Area Developer and that information was made public it would shock everyone. Have you ever wondered why Liberty Corp never sold the vast majority of DMAs to anyone that had the resources to pay for it? It wasn’t accidental I can assure you. Liberty has not allowed the overwhelming majority of their Area Developers to ever make a penny except on paper for a short period of time and then normally by year 3 foreclosed on the vast majority making Corp millions and millions of dollars. I wonder how many DMAs were sold to multiple people then foreclosed on each time? My guess is the avg for most would be 3 to 5 times. The entire house of cards is built on taking advantage of people then discarding them after they have been milked. Do not confuse Corporate ADs employees employees and provide support that are on payroll with ADs who purchased DMAs.