LIBERTY TAX SERVICE Franchise Complaints

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

• Hewitt was due to make $600K in base salary (cash). Now that’s $1. He still has the opportunity to make a lot from bonuses.

  If 23% of Liberty clients were affected by ACA and got charged something for one or more of the new forms, it’s very surprising to see that the average charge only increased 3% from $210 to $217. This makes me believe that (i) Liberty lowered 2nd half prices quite a bit (revs were up 7% through mid-Feb according to their press release) and (ii) Liberty probably lost a lot of higher-priced EIC clients to JH.

• The real question is not what was mr hewitts salary but why was 21 million spent on stock repurchase. That caused the drain on cash, which is down 50percent from last year. The other stuff is a distraction.

  Jackson Hewitt is not the problem. Eic customers are being lost to preparers who don’t have ptins or efins and lost to the never ending competition.

  The future market will be balanced between early and late. That will bring the fees down for everybody. That’s probably why some people are cashing out.

  Aca is not done by a long shot, but it will not raise the fees. I noticed all the talk about advertising but not for existing franchisees.

  If you are not talking to people now, store will probably lose customers next sesaon.

  It’s a highly competitive market, and in three months we start training our competition in tax school.
  Dr. Z, Jackson Hewitt’s prices are so high we don’t have to worry about them in my area.

• The company continues to have cash flow problems. But that didn’t stop them from issuing a dividend. The top two shareholders will receive roughly 25% of the declared dividend. Hewitt gets $160,000.00.

  If your considering this franchise stop now before you will lose your investment.

  I will gladly talk to any prospective franchisee.

• Hundreds of thousands of documents are collected for what you need for a case or remedy; while a defensive strategy to protect anything should be, risk management.

  There is no law that stops your right to the PURSUIT of happiness.
  Cheers to all who are putting that pursuit into action and continue to do so!

  They said OJ was not guilty. But in another court, he paid the injured.

  Every now and then, someone notices a case where character SHOWS on how you defend yourself.

  B. UNJUST ENRICHMENT
  Plaintiffs also bring causes of action against John and Denny Hewitt for unjust enrichment, alleging that plaintiffs “have conferred a financial benefit upon LIBERTY TAX, JOHN HEWITT, and DANNY HEWITT as a result of their paying for tax preparation services for which LIBERTY TAX receives royalties and commissions on tax refund anticipation loans and passes income to its principal shareholders JOHN HEWITT and DANNY HEWITT.” Compl. ¶ 108.
  In South Carolina, to recover for unjust enrichment the plaintiff must show “(1) that he conferred a non-gratuitous benefit on the defendant; (2) that the defendant realized some value from the benefit; and (3) that it would be inequitable for the defendant to retain the benefit without paying the plaintiff for its value.” Sauner v. Public Serv. Auth. of S.C., 581 S.E.2d 161, 167 (S.C. 2003).
  The Hewitts contend that plaintiffs cannot satisfy the first element—that plaintiffs conferred a benefit on them. Instead, the Hewitts argue that any benefit they received must have come from Liberty Tax. Liberty Tax receives royalties and marketing fees from franchises based upon the franchises’ gross revenues, and also receives commission income on refund anticipation loans made by third party banks. See Fuller Statement, Oct. 22, 2010, at 95 (stating that Liberty Tax receives a total 19 percent royalty from each franchisee’s net fees). The Fourth Circuit has affirmed the dismissal of an unjust enrichment claim when “[a]t most,” all plaintiff “can demonstrate [is] that [the defendant corporation], as opposed to [its owner], received a nongratuitous benefit.” Metalmeccanica Del Tiberina v. Kelleher, No. 04-2567, 2005 WL 2901894, at *4 (4th Cir. Nov. 4, 2005) (unpublished per curiam opinion) (“Any benefit [the owner] received .. . came from [the corporation]—not [the plaintiff].”); see also Johnson v. Ross, 419 F. App’x 357, 362 (4th Cir. 2011) (“Each of the actions taken by [plaintiffs] benefited [defendant], if at all, only indirectly by virtue of [defendant’s] status as a [corporate] shareholder.”).
  In their response brief, plaintiffs claim that “[a] jury question exists whether Defendants engaged in a pattern of criminal violations for which the Plaintiffs are the victims. If so, Plaintiffs would be entitled to recover their out of pocket losses from the Defendants JOHN HEWITT and DANNY HEWITT through the restitution remedy of unjust enrichment.” Pls.’ Resp. Opp. Defs.’ Mot. Summ. J. 18. This argument wholly ignores the first element of an unjust enrichment claim under South Carolina law—that plaintiffs confer a non-gratuitous benefit on defendants. Plaintiffs have failed to concretely allege or show that they directly conferred any benefit on the individual defendants. Therefore, the court grants summary judgment on the unjust enrichment claims against the Hewitts.

• Trisha!

  Good to see a post from you. I cannot figure out how a despicable pig like John Hewitt has been able to get away with so much for so long. He surrounds himself with Lawyers upon Lawyers upon Lawyers.

  It would be incredible for the tides to be turning and for him to feel some of the ridiculous over the top stress he has caused so many others for years.

  Never in my life did I ever imagine joining a franchise so many years ago and have my world turn upside down. For years & years & years. Way past the 5 year contract. It has affected every fiber of my being and every part of my life.

  What ever YOU are doing to bring him to justice–THANK YOU so very much. He is a classless pig. I had the “pleasure” of riding in an elevator with him at a convention many years ago and I should have spit in his face.

  May he rot in jail for the rest of his life.

• What is sad is so many investors were sold territories with little chance of success.

  Liberty did over 1.9 million returns this year. If every store did 100 free returns, then Liberty did around 1.5 million paid returns. Yes, potential investors, you are to work for free. Why?, So the total return count goes up while your profits go down. What an insane approach to business. No skin off corporate’s back, just your slow crawl to failure.

• 2. CAUSATION

  The Hewitts additionally argue that plaintiffs have failed to meet RICO’s causation requirement.

  Although RICO is a criminal statute, it provides a civil remedy for private plaintiffs. See 18 U.S.C. § 1964(c). Section 1964(c) provides,

  Any person injured in his business or property by reason of a violation of section 1962 . . . may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.

  Id. (emphasis added). The Supreme Court has framed this causation requirement as one of standing. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (“[T]he plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation.”); Sadighi v. Daghighfekr, 36 F.Supp.2d 279, 286 (D.S.C. 1999).

  To have standing to bring a private cause of action under RICO, “the plaintiff is required to show that a RICO predicate offense `not only was a `but for’ cause of his injury, but was the proximate cause as well.'” Hemi Group, LLC v. City of New York, N.Y., 130 S.Ct. 983, 989 (2010) (quoting Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 268 (1992)). To meet the causation requirement with respect to wire fraud, a plaintiff must show that he detrimentally relied in some way on the fraudulent wire and that the wire was the proximate cause of the alleged injury to his business or property. Trigon, 367 F.3d at 233 (citing Chisolm v. TranSouth Fin. Corp., 95 F.3d 331, 337 (4th Cir. 1996)).

  The Hewitts contend that plaintiffs cannot establish causation because there is no evidence that the named plaintiffs were exposed, directly or indirectly, to any of the unlawful tax preparation methods allegedly conducted by John Hewitt, Danny Hewitt, or Annie Fuller. Defs.’ Reply Supp. Mot. Summ. J. 3-4. Plaintiffs counter that “[e]ach of [the] Plaintiffs had their tax returns prepared by a Liberty Tax trained preparer working for a franchise owned by Annie Fuller or her business partner Chris Hanyes.” Pls.’ Resp. Opp. Defs.’ Mot. Summ. J. 16.

  There is some evidence that the scheme allegedly sanctioned by John Hewitt and taught by Annie Fuller was put in action in South Carolina. For example, the Martins had their tax returns prepared at the Newberry, South Carolina Liberty Tax franchise owned and operated by Annie Fuller. See Kenneth Martin Dep. 14:15-18 (stating that his return was prepared in Newberry by a preparer whom he believed to be Annie Fuller’s mother). From this, it could be inferred that the audits experienced by the plaintiffs occurred as a result of the alleged illegal tax preparation scheme. See id. at 56:7-16 (statement by Kenneth Martin that he was audited by the South Carolina Department of Revenue as a result of the tax preparation at the Newberry franchise). The court finds that plaintiffs have established genuine issues of fact on the causation element for trial.See Peckham v. Continental Cas. Ins. Co., 895 F.2d 830, 837 (1st Cir. 1990) (causation questions are “normally grist for the jury’s mill”);First Am. Corp. v. Al-Nahyan, 17 F.Supp.2d 10, 23 (D.D.C. 1998) (holding that causation question on RICO claims must go to the jury).

  For the above reasons, the court grants summary judgment to Danny Hewitt on plaintiffs’ RICO claims but denies summary judgment to John Hewitt on these claims.4

  What does one do when a trial is set?

• Trish, If I am interpreting this correctly, John Hewitt could be liable for the damages a franchisee sustained as a result of Liberty’s training on how to prepare a fraudulent return? If true, are the RICO requirements absolute in that there needs to be shown hard or written evidence that the Hewitt’s knowingly participated in the training methods of fraud that caused damage to the franchisee?

  If this is the case, there would be quite a few clients as well as franchisees that stand to collect damages from Liberty Tax. It would also make the IRS more aware of the obvious fraud that the corporate climate fosters to its franchisees, thus making Liberty liable for lost tax revenue. Maybe we should all get together and figure out a united front against Liberty to recover our lost franchise fees and IRS’s lost revenue. Are there any lawyers out there willing to take a case on like this?

• IV. CONCLUSION

  Based on the foregoing, the court GRANTS IN PART and DENIES IN PART defendants’ motion for summary judgment.

  IT IS FURTHER ORDERED that this case will be set for jury selection on May 1, 2013.

  AND IT IS SO ORDERED.

  FOOTNOTES
  1. In this case, the “enterprise” is alleged to be Liberty Tax. Compl. ¶¶ 19(b), 89.

  2. Grabert was terminated by Liberty Tax on April 20, 2012. Defs.’ Reply Supp. Mot. Summ. J. Ex. C. She provided an affidavit on June 13, 2012, two days before defendants filed their motion for summary judgment. The affidavit was not provided to defendants until July 9, 2012, as an attachment to plaintiffs’ reply brief in support of their motion for class certification. Grabert was deposed, with leave of court, on August 1, 2012.

  3. The court grants summary judgment to Danny Hewitt on plaintiffs’ claims brought under 18 U.S.C. §§ 1982(c) and (d). See GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 551 n.2 (4th Cir. 2001) (holding that when a substantive RICO claim brought under § 1962(c) fails, the § 1962(d) “RICO conspiracy claim fails as well”).

  4. Defendants take issue with a legal theory asserted in plaintiffs’ motion for class certification that is absent from their complaint. Plaintiffs have adopted a new and additional theory that defendants’ alleged scheme of charging for tax returns on a per-form basis amounts to a “contingency fee” that violates Treasury Department Circular 230. This theory is irrelevant to the instant motion for summary judgment as it does not from a basis of the RICO claims asserted against the Hewitts. In support of this contingency fee theory, plaintiffs offer the expert testimony of Mary Rae Fouts, who opines that plaintiffs’ fee formula is dependent upon the results obtained from a tax return and is therefore a prohibited contingency fee under Circular 230. Defendants have filed a motion to exclude the expert report and deposition testimony of Ms. Fouts. This motion was filed to exclude the report and testimony “from consideration as part of the Plaintiffs’ Motion for Class Certification.” Defs.’ Mem. Supp. Mot. Exclude 1. The court has already ruled on the motion for class certification and found that Ms. Fouts’ testimony was not critical to resolving that motion. Therefore, the court will deny the motion to exclude without prejudice with leave for defendants to challenge the admissibility of Ms. Fouts’ testimony if this case goes to trial.

• 1. PATTERN OF RACKETEERING ACTIVITY

  Defendants first contend that plaintiffs have failed to show that the Hewitts participated in the enterprise through a pattern of racketeering activity.

  RICO defines “racketeering activity” in part as any act that is indictable under certain provisions of federal law, including the law prohibiting wire fraud. 18 U.S.C. § 1961(1)(B) (citing 18 U.S.C. § 1343). Under the wire fraud statute, it is an offense for anyone to scheme to defraud someone else out of money or property by making false and fraudulent representations and then to attempt to execute or carry out the scheme through the use of interstate wire communications. 28 U.S.C. § 1343. The elements of wire fraud are “(1) a scheme disclosing an intent to defraud; (2) the use, respectively, of the mails or interstate wires in furtherance of the scheme.” Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 233 (4th Cir. 2004).

  A “pattern of racketeering activity” requires at least two acts of “racketeering activity” committed within ten years of one another. 18 U.S.C. § 1961(5). “[A] plaintiff must allege a continuing pattern and a relationship among the defendant’s activities showing they had the same or similar purposes.” Anderson v. Found. for Advancement, Educ. & Emp’t of Am. Indians, 155 F.3d 500, 505 (4th Cir. 1998) (citingH.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229 (1989)). “Continuity may be established by showing that `predicate acts or offenses are part of an ongoing entity’s regular way of doing business.'” Id. (quoting Nw. Bell Tel. Co., 492 U.S. at 242).

  Plaintiffs rely on the October 22, 2010 statement of Annie Fuller as evidence of racketeering activity, but as pointed out by defendants, Fuller recanted many of the allegations of wrongdoing made in her statement during her deposition. Defs.’ Mem. Supp. Mot. Summ. J. 10; see, e.g., Fuller Dep. 103:12-16 (“Q: Are you aware of any training by Liberty Tax employees . . . that was focused on maximizing revenue by preparing false and fraudulent tax returns, 1040, 1040A, 1040EZ? A: No.”); id. at 104:15-20 (“Q: Are you aware of any false filing of returns? A: No. Q: False reporting of returns? A: No.”). Nevertheless, plaintiffs set forth other evidence that they contend establishes that the Hewitts engaged in a pattern of racketeering activity.

  For example, plaintiffs propound the testimony of Trisha Grabert.2 In her affidavit, Grabert states that beginning in 2007, she owned four Liberty Tax franchises until being terminated last year. Grabert Aff. ¶¶ 4-6. She avers she was trained by Annie Fuller to increase her average net fee for tax returns by using unnecessary forms that contained false or inflated data solicited from the customer. Id. ¶¶ 9, 17. According to Grabert, the method of soliciting false information from low income clients was called “digging deep.” Id. ¶ 19. In her deposition, Grabert testified she was “taught to probe the customer and let them make . . . up” false or inflated data to be entered into the Liberty Tax computer system, Grabert Dep. 137:13-14; that she “purposely solicited [customers] to answer questions knowing that it is likely false,” id. at 147:25-148:1; that Liberty Tax privately advocated in the training sessions that preparers submit returns they knew were fraudulent, id. at 158:15-23; that she would sometimes “use every worksheet because it adds more form charges,” id. at 169:16-18; and that it is “one hundred percent correct” that the phrase “digging deep” meant “to ask and seek improper information as opposed to being a due diligent tax preparer,” id. at 241:1-9. There is some (but by no means abundant) evidence to support Grabert’s assertions. ComparePls.’ Resp. Opp. Defs.’ Mot. Summ. J. Ex. 5 (December 2008 email from John Hewitt to Annie Fuller stating that Fuller should “[f]ollow my instructions”), with Grabert Dep. 46:19-22 (stating that John Hewitt would teach illegal tax preparation methods “through a third party”); id. 76:10-16 (stating “John Hewitt watched [Fuller] do the speaking and training for him” and Fuller was “under the direction of John Hewitt to do this training”).

  Viewed in the light most favorable to plaintiffs, there are genuine issues of material fact as to whether John Hewitt conducted or participated in a pattern of racketeering activity. If believed, Grabert’s testimony would create an inference that John Hewitt spearheaded or at least sanctioned a scheme to electronically file thousands of fraudulent tax returns, which would satisfy the “pattern of racketeering activity” requirement. See Ill. Dep’t of Rev. v. Phillips, 771 F.2d 312, 316-17 (7th Cir. 1985) (holding that government stated a claim for civil RICO for repeated mailing of false tax returns, a mail fraud violation). However, plaintiffs have produced no evidence to sufficiently implicate Danny Hewitt in the alleged fraudulent scheme. In fact, Grabert admitted in her deposition that Danny Hewitt was not involved in any training regarding tax preparation issues. See Grabert Dep. 33:1-14 (stating that Danny Hewitt did not teach Grabert “anything about how to prepare tax returns”); see also Mathias Dep. 34:3-9 (stating that he had never had a training session with Danny Hewitt where he discussed preparation of tax returns because “[h]e’s more marketing”). Therefore, summary judgment is warranted in favor of Danny Hewitt on plaintiffs’ RICO claims.3

• I. BACKGROUND

  Plaintiffs filed this action in federal court on November 22, 2010 against defendants JTH Tax, Inc., d/b/a Liberty Tax Service (Liberty Tax), John Hewitt, and Danny Hewitt. Liberty Tax answered the complaint on January 3, 2011 and filed a third party complaint against Annie Fuller, a former Liberty Tax franchisee. On February 21, 2011, John and Danny Hewitt (the Hewitts) individually filed motions to dismiss, which were denied on July 14, 2011. The Hewitts answered the complaint on July 27, 2011.

  On May 15, 2012, plaintiffs filed a motion for class certification. On June 15, 2012, the Hewitts filed a motion for summary judgment and all defendants filed a motion to exclude an expert report and testimony. The court held separate hearings on the three motions. On February 5, 2013, the court denied the motion for class certification.

  Plaintiffs complain that the Hewitts taught Liberty Tax franchisees and their employees to sell unnecessary forms and schedules when completing tax returns so that the franchisees could charge greater fees, on a per-form basis, to the customers. In turn, the customers would receive a greater tax refund, out of which the franchisee’s fees were paid. Ultimately, many of the customers were audited and incurred additional tax liability, interest, and penalties. Plaintiffs assert causes of action for violation of RICO (against the Hewitts), breach of contract (against Liberty Tax), breach of fiduciary duties (against Liberty Tax), and unjust enrichment (against all defendants).

  According to the complaint, Liberty Tax is engaged in the operation of franchises that prepare personal income tax returns, facilitate refund anticipation loans, and conduct other tax services across the United States and Canada. Id. ¶ 5. John Hewitt is the President, CEO, and sole founder of Liberty Tax, and his son, Danny Hewitt, is the Vice President and Director of Guerilla Marketing. Id. ¶¶ 6-7. Liberty Tax franchisees operate more than 3,000 offices in the United States, including at least seventy in South Carolina. Id. ¶ 5. Franchisees act as agents of Liberty Tax for the purpose of preparing tax returns. Id.

  Third party defendant Annie Fuller was a franchisee who opened the Newberry, South Carolina office of Liberty Tax in either 2006 or 2007.Id. ¶ 56; Defs.’ Answer ¶ 140. During her first year, Fuller set the company record for tax returns filed. Compl. ¶ 56. As a result of her success, Fuller was engaged by Liberty Tax to begin working on a national scale by providing training seminars to other franchisees, explaining marketing techniques, and revising the Liberty Tax operations manual. Id. ¶¶ 57-58. In the meantime, Fuller allegedly developed a close relationship with the Hewitts, appearing with them in national promotional events and training sessions. Id. ¶¶ 60-61.

  In 2009, plaintiffs Kenneth and Myra Martin sued Liberty Tax and Annie Fuller in the South Carolina Court of Common Pleas for Newberry County. Id. ¶ 55. The Martins complained that their tax returns had been prepared improperly at the Newberry franchise of Liberty Tax and essentially alleged the same fraudulent scheme as that asserted in this case. See id. ¶ 63. According to the complaint in this case, Liberty Tax refused to defend Fuller in state court, instead portraying her as a “rogue franchisee” and ultimately terminating her franchise agreements. Id. ¶¶ 64-65. During the state court litigation, Fuller’s attorney withdrew for nonpayment. See Defs.’ Mem. Supp. Mot. Summ. J. 3. Defendants claim that Fuller made a deal with plaintiffs’ counsel to provide recorded statements regarding the Liberty Tax franchise system so long as the state court claims against her would be dismissed with prejudice. Id. at 3-4.

  Plaintiffs allege that in her recorded statements, Fuller admitted she, at the direction of the Hewitts, taught improper tax preparation methods at her seminars. Specifically, Fuller would allegedly teach franchisees how to increase the cost of tax returns and the amount of refunds due to customers by decreasing the customers’ tax liability through the preparing and filing of false and fraudulent forms and schedules claiming improper deductions and/or credits. The Hewitts paid Fuller to give seminars on how to “close the sale,” i.e., convince customers that multiple forms were needed in order to complete tax returns. See Compl. ¶ 76. For example, Fuller would explain how asking leading questions, “digging deep,” and “never taking no for an answer” would elicit information from customers regarding the amount of “qualifying children” they had for purposes of an earned income tax credit. Id. ¶¶ 77-78. Plaintiffs further claim that John Hewitt would teach the tax preparers not to be concerned about the truthfulness of information given by customers, stating, “that’s between them, God and the IRS if they’re telling the truth.” Id. ¶ 82. To evade scrutiny by banks and federal and state taxing authorities, Fuller, at the direction of the Hewitts, would allegedly train franchisees to artificially lower the average cost of returns by falsely reporting free returns into the Liberty Tax computer system. See id. ¶ 72.

  The named plaintiffs allege they are South Carolina residents who employed a South Carolina franchise of Liberty Tax to prepare and file federal and state income tax returns in South Carolina. Compl. ¶¶ 1-4. They further allege that they were subjected to the unlawful scheme taught by Fuller at the direction of the Hewitts. The allegations in the complaint are separated as they pertain to the individual sets of plaintiffs as follows:

• II. STANDARD

  The court shall grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “[S]ummary judgment will not lie if the dispute about a material fact is `genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. At the summary judgment stage, the court must view the evidence in the light most favorable to the non-moving party and draw all inferences in its favor.Id. at 255.

• ORDER

  DAVID C. NORTON, District Judge.

  This matter is before the court on a motion for summary judgment brought by defendants John and Danny Hewitt. Plaintiffs allege they suffered economic harm as a result of an unlawful scheme employed by defendants to defraud federal and state taxing authorities by submitting false and fraudulent tax returns, which led to audits, additional tax liability, penalties, and interest. For the reasons set forth below, the court grants in part and denies in part the motion for summary judgment

• A. THE MARTINS

  Kenneth and Myra Martin employed the Newberry, South Carolina Liberty Tax office in February 2008 to prepare their 2006-2007 federal and state tax returns. Id. ¶ 26. Liberty Tax gave an “Accuracy Guarantee” to provide the most accurate return and largest possible refund and to pay any penalty or interest resulting from an error in preparation. Id. ¶ 27. The Martins allege that Liberty Tax agents improperly solicited information regarding business expenses that were inflated or not actually deductible and otherwise reported false information to taxing authorities in an attempt to fraudulently reduce the Martins’ tax liability so they would be satisfied with their return and come back for future tax filings. See id. ¶ 28. The Martins were audited by the South Carolina Department of Revenue. Id. ¶ 29. They claim that Liberty Tax failed to defend or pay money towards the costs of defending the audit in breach of the Accuracy Guarantee. Id.¶ 34.

  B. THE GOODWINES

  In April 2008, David and Catherine Goodwine employed the Broad River Road, Columbia, South Carolina Liberty Tax office to prepare their 2007 federal and state tax returns. Id. ¶ 35. In furtherance of the alleged unlawful scheme, the Goodwines claim that Liberty Tax agents inappropriately solicited information regarding mileage payments to deduct as business expenses. Id. ¶ 37. The Goodwines were audited by the South Carolina Department of Revenue and the invalid business deductions were disallowed. Id. ¶ 40. Although the Goodwines originally received a South Carolina refund of $1,768, they eventually had to pay $2,368 in back taxes, penalties, and interest. Id.Moreover, the Goodwines were audited by the IRS. While they initially received a federal refund of $2,230, they ultimately were ordered to pay $5,117 in back taxes, penalties, and interest. Id. ¶ 41. According to the Goodwines, Liberty Tax failed to defend them or reimburse these payments in breach of the Accuracy Guarantee. Id. ¶ 42.

  C. THE ALLENS

  In April 2008, Terry and Amanda Allen employed the Broad River Road, Columbia, South Carolina office of Liberty Tax to prepare their 2007 federal and state tax returns. Id. ¶ 43. According to the Allens, Liberty Tax improperly submitted a business mileage deduction to the IRS and claimed other inappropriate deductions. Id. ¶ 45. After receiving a federal refund of $1,161, the Allens were audited by the IRS, which disallowed the invalid business deductions and ordered the Allens to repay $1,662 in back taxes, penalties, and interest. Id. ¶ 47. The Allens contend that Liberty Tax failed to defend them or reimburse their payments in breach of the Accuracy Guarantee. Id. ¶ 48.

  D. THE REIDS

  Jeffrey and Tawanna Reid employed the Broad River Road, Columbia, South Carolina office of Liberty Tax to prepare their 2006-2008 federal and state tax returns. Id. ¶ 49. The Reids allege that Liberty Tax filed returns containing deductions for business mileage that were actually non-deductible. Id. ¶ 51. Despite receiving a refund of $17,833, the Reids were audited by the IRS, which disallowed the invalid business deductions and ordered the Reids to repay $2,400 in back taxes, penalties, and interest. Id. ¶ 53. According to the Reids, Liberty Tax failed to defend them or reimburse their payments in breach of the Accuracy Guarantee. Id. ¶ 54.

• The pro-Liberty commenters have been silent lately. There real is no good news to report for this brand. The facts reported in their financial reports, that shows a decline in storefronts is an indication that interest in this company is waning. I just saw an ad for the top 100 franchise investments and Liberty was listed in the ad claiming a $100,000 investment is required with no experience necessary. So, who are you going to get to do the tax returns? Finding good tax preparers is not the same as finding someone to make sandwiches.

  This shows that Liberty is in the business to sell territories and collect royalties, ad fees, and bank fees. The wake-up call for any unwise investor today is the 100k lost and the May 5th minimum royalty fee to be paid from your personal funds.

  If you are being wooed by Liberty to buy a territory, you have been and are once again being warned not to do so. This is free advice, hopefully you will heed it and look elsewhere to invest your money.

• Trisha – Is this a new development in this case? Or are you showing us documents from this case? I thought LTS settled out of court with these people?

  In any case, thanks for posting. At least you are over your 2 year portion from LTS. We will be in just a couple of months!!!

  Best thing leaving them even though it cost a lot a of money and emotional turmoil!!

• Trisha – Is this a new development in this case? Or are you showing us documents from this case? I thought LTS settled out of court with these people?

  In any case, thanks for posting. At least you are over your 2 year portion from LTS. We will be in just a couple of months!!!

  Best thing leaving them even though it cost a lot a of money and emotional turmoil!!

• ^^^Franchizee:

  Good to hear you are almost at your two year mark relatively unscathed. Not the jail time and bankruptcy and overwhelming emotional turmoil others have faced at their hands.

• I know right? It has been good, at least I have money to pay expenses past 05/05 the last two years. This year, I am ahead and hoping next year will be more ahead. :)

• Good for you Franchizee! There is life after Liberty!

  For those of you thinking about buying a territory, note, May 5th of every year is like Christmas for John and his crew. For the failing franchisee’s, it is the most hated day of the year.

  Why? Minimum royalties are due. OUCH!

• The worst day of my year was paying those minimum royalty fees. I received nothing for them since Liberty did not believe in National Advertising, Radio Advertising or local TV. I paid a lot of money to them to get nothing in return. This is how they operate-they love to rip off their franchisees.

  They also teach their franchisees how to rip off the government by aggressively tweaking customer’s tax returns in order to get a larger refund that causes higher fees charged that leads to a higher royalty payment. This is clearly a racket that Liberty and Hewitt perpetuate through insane costs for territories and inflated preparation fees. It is good to see that some people are finally getting wise to their practices. I feel bad for those of you who might get duped by them to buy a territory since this forum has gone out of its way to warn you. Again, if you do buy a territory or have your returns prepared by these crooks, you deserve everything you get.

• Admin: This site has been instrumental in providing information to potential franchisees about Liberty Tax. However, JTH is now pushing a new franchise Siempre Tax + to basically sell the same business model to the Hispanic population. It would be nice if some how we could link Siempre Tax + to this site?

• Perhaps the contributors here can help put together a post of, say 5 or so things that those considering a Siempre Tax franchise should be aware of… or look into before investing.

  What do you suggest we include in this list?

  If you all can provide the content, I’ll find someone to translate it and post it in English & Spanish.

• Liberty is trying to squeeze the Hispanics too. Trouble for Liberty is that there are well established tax professionals that having been doing returns for Hispanics for years now. It is hard to compete with these businesses on price and the comfort the Hispanics have in doing business with professionals that are part of their culture.

  It is not a new market and Liberty will fail miserably at this. Like the ACA was supposed to increase business, these tax franchises to a limited market is another Liberty “pipe dream”.

  Do not do business with Liberty – they only want to squeeze as much money out of their investors and their clients. Buyer beware!

• Just remember that Siempre Tax territories will be sold over top of the Liberty Tax territories. The biggest problem here is that if you owned the original Liberty territories, and do Hispanic taxes, you may loose clients.
  The only person to win with Siempre Tax is JTH.

• Unfortunately, I have found you guys after buying in:(. We just completed our first year, it’s been miserable and I want out! I don’t care about the 2 yr non compete, how do I walk away from my area without having to pay future royalties? Can I get any money back from the computers or signs or is it all junk bound?

  I will repeat everything you said before, if you haven’t already bought don’t walk away, run away! Run away very, very fast.

• Lori, make sure your royalties are paid in full. See if you have any other zees in your area, if they can purchase any of your extra items. Check the agreement to see if you owe anything else.

• Lori, Franchizee is spot on with his instructions as to what to do.

  I am sorry it did not go well for you. It is too bad you did not find this site until now. Please don’t feel like a failure, many of us had that sinking feeling of defeat and being taking advantage of after our first year. Liberty is today, a bad business model in an industry with an established and aggressive #1 player (Block). Liberty has your money and will soon have your territory back. Your peace of mind by exiting now is worth more than the loss you will take. The bright side is that you can take a loss on your own tax return so maybe gear your personal finances, for this year, in a way that the loss minimizes your personal tax liability.

• Lori: Don’t know what financial position your in but I suggest talking
  to a franchise Lawyer. The franchise agreement is very one sided but there
  are still obligations that the franchiser must meet. i.e. proper site location,
  support etc. A franchise attorney told me that I would have had a better chance of
  breaking the agreement for non performance if I was in the first year of my contract.

• For those of you that are listening to the Live Conference Calls, you are probably going to hear things like…Burger King always tries to park next to Mc Donalds..we need to park next to Block and there are many Blocks that we can get next to etc. don’t be fooled by this rhetoric…..Block has hardly grown over the last several years and Mc Donalds and Burger King are hardly growing as well. If moving next to an H&R Block is going to make you successful…why aren’t there Liberty corporate stores next to every Block now? They will spin this to say franchisees are better than company stores blah blah blah, the fact is they want you to be the guinea pig with your money not theirs!! Don’t be fooled and call all the offices in your area to see which ones are making money…don’t let the hype fool you do your do diligence first…to find out the truth! You will be glad you did……:)

• The big question of the day is why does Liberty have free online software that has no income restrictions? It’s free, period. How does this help a franchisee? The other major online software providers, including HR Block, have restrictions to the free offering. Liberty has none. DIY, freetax.com. Most would call it selfish and no concern for the franchisee. I guess today I’ll be with most. Question of the day? What are they preparing for? Whatever it is , they forgot to tell us.

• For those of you looking to buy a Liberty Tax franchise, you are SO lucky you found this website before you plunk down any money. Ask yourself this: why are there over 4400 posts, the most of any franchise on this forum?

  Why? Because this franchise is evil. The CEO is evil and all the corporate dweebs are evil. They DO NOT want you to succeed so they can re-sell your territory and make money over again on the same 2 mile “made up” territory.

  You really have no idea how one sided this franchise is until it’s too late to do anything about it. Walk away, they have your money & re-sell it again for more money. Wait the 5 years & then get out, they make your life miserable. I am still fighting them, and this is well over a decade that I ENDED my 5 year contract. They will NOT give up. They will fight you to the end, making sure you are bankrupt, in jail and unable to do another tax return for the rest of your life. I’m not making this up. They will make sure to squash you into the ground like an ant. It’s like David versus Goliath, with Goliath winning ALL of the time. Not some of the time, ALL of the time.

  Ask yourself: How many lawsuits are initiated by Liberty Tax against their franchisees? I don’t know an exact number, but I bet that Bill, or Greg, Uphillbattle or NCHillbilly knows the number. HUGE amounts. Don’t kid yourself. This is not a franchise to get involved with. Back away and save yourself lots of grief, money & stress. The recent franchisees that made the newspapers? I am almost certain Liberty Tax was behind their problems. They must have done something to make Liberty mad and that’s how Liberty handles them. By verbally teaching them tricks on how to maximize schedule C’s and then calling the IRS on them when they do something to piss Liberty off.

  Oh yeah, did I mention stress? PLEASE learn from those who know. Run away from this contract. This franchise is disgusting toward their franchisees.

  There is only ONE reason why I keep posting here year after year. To STOP innocent people from making the biggest mistake of their lives by joining this awful franchise. I can’t wait to see them fail. They have enough Lawyers working for them to “protect” themselves…..But hopefully that won’t deter the IRS or the DOJ from doing their jobs and shutting this pig hole down.

• Siempre Tax or Liberty Tax are both the same so which everyone your looking at is a bad deal. The company which at one time talked about how fast it’s growing has now decreased in office size over the past two years. I believe the number one reason is this site and the stores of those who lost their investment. The people on this site like SanFranDan gain nothing monetarily from posting here. Their sole purpose is to help prevent others from making the mistake we made by signing with this company. 4482 post later we are still working to help you avoid our mistake.

  Buyer Beware!!!

• For anyone looking at this site who is considering a Liberty Tax or Siempre Tax Franchise, this site is objective and allows/encourages both positive and negative comments about owning one of these franchisees.

  If you look back over all the post you will find people who defended this franchise. But as time has gone by they have had shown less and less credibility and now with results of operations being published in the company’s own financials it is very hard for them to speak well about this company.

  Buyer Beware!!!

• Hello Bill:

  I guess Barf villa and his many aliases decided it wasn’t worth posting lies on here and contributing to the point count going higher. I say good riddance to him and all the other shills Liberty is paying to shut down this forum and to dispel lies. The REAL truth comes out eventually and they will get their punishment.

  For those of you looking to join, back away and go elsewhere. It is SO not worth it.

• This is not a business model that would work for an entrepreneur. This is a business model that is a racket for the franchisor. Siempre Tax, being a direct competitor to Liberty should be a violation of the franchise agreement. Since Liberty has decided to NOT protect its franchisee’s by offering protected territory, then I would question the whole validity of the franchise agreement in the first place. When I first got my franchise agreement, it was made very clear that the territory I purchased was protected from any other related Liberty or Liberty controlled franchise from entering my territory. I guess Liberty has forsaken its older franchisees (if any are still left). If I were a prospective franchisee, I would be looking into this past performance, now that there is a few years of it, and then decide if I would also want to include myself in this list of Unhappy Franchisees. By now, there should be enough information out there about the Liberty crooks that any person with half a brain would know to stay away. But, I guess, Liberty looks for those with no brains. There must be plenty of them out there, unfortunately.

• Until recently there was a robust debate on this site between former franchisees and some current franchisees. However, now those pro-Liberty folks have stopped posting. It could be because their arguments where ineffective when compared to the facts presented by former franchisees. It may also be because the company has instructed franchisees not to post in an effort to take the air out of this site. Franchise sales for Liberty Tax have declined for the past two straight years and this site has played a major role in that decline.

  Buyer Beware!!!

• One thing that has happened where I live is that one franchisee is not liked by Liberty. The other franchisee is well liked. The second franchisee is marketing in all territories, even the first franchisee’s area.
  Liberty does not care since the first franchisee is not well liked.

  How would you like to buy a franchise, and another franchisee markets their stores in you area?

• Liberty Corp. probably does not care much about any of their franchisee’s. Let’s face facts, John Hewitt has made his millions from successful, unsuccessful, and fraudulent franchisee’s. All we can do now is warn potential buyers of territories that their chances of success is slim to none. You want to make one man even richer? Well go ahead, because you will lose much money.

• ADMIN:

  I agree that pro-Liberty people have been very quiet lately. Honestly, my first instinct is that someone will try to hack into this website. Please be on the lookout. I wouldn’t put anything past them. They are capable of a lot of bad stuff.

• Liberty’s problems are now revealed in their financial reports. It is hard for pro-Liberty people to give an upbeat status when store sites are declining.

  Also, 19% of your revenues, paid in fees to Liberty, makes it difficult to be profitable. The successful franchisee’s know they are paying hefty fees back to Liberty Corp.

• Greetings all!! Thought I’d swing by the pants-in-a-bunch forum and see whats new…much to my surprise, nothing. Just the same old misinformed losers on parade.

  Noting the speculation on the lack of “pro-Liberty” posts, for me the rants were amusing for a time but just became sooooo boooorrrring.

  Anyway, adding 2 more stores this fall, got some fantastic locations lined up.

  Back to the life-is-good forum. Cheers!

• Henry, did you get the two stores that fraud shut down? Or, are you a Block franchisee?

  You see Henry, if you are successful (good for you), you pay 14% royalties and get the same in return (software, tech support) as a losing franchisee. I would say you are not getting the most bang for your buck.

  We do enjoy your comments.

• Looks like more insiders are unloading their shares of Liberty. Namely, Steve Ibbotson a 10%+ owner as well as Datatax Corp. The financials indicate that this is the time to unload, exercise your options and get the hell out. That’s what insiders are doing and Hewitt is trying to prop up the shares by making the buys so there is less of a price slide than what there should be. Looks again like stock manipulation, so, who will be left holding the back on worthless stock? Hmmmmmmmm…..

• On July 20, Sterling Capital added Liberty to it’s portfolio. They have $50,000,000,000 under management. But I’m sure Texastee has more info, resources & insight then they do…

• Would just like to know if any current or former franchisees got short changed on their payroll taxes when they were in FAC?

• Wonder how much Henry Bloch gets paid to continue to harass poor already ripped off former franchisees….Seriously Scum Bag Get A Life!!

• This time of year is important to Liberty. They need to convince, those interested, into buying territories. Tax school is a little over a month away and this is a revenue stream for Liberty. Books sold to tax students are sold over cost by most franchisee’s. The franchisee, again, loses money in this endeavor. The time and money spent training students is often done at a loss. Does Liberty provide you any funds for this? Nope. Again, the claim that you only work part of the year and make all this money is not true. If the franchisee does not teach the class, you need to pay someone to do so. You are working from about August 1st (starting to organize tax school) until April 15th. You are required to be open 8 hours a week during off season. So, this is not just a seasonal business. Expenses for rent, utilities, payroll, etc., come due every month. Revenue is little for eight months. This is a tough business when you also need to pay 19% back to Liberty Corp. You do get software, tech support, and some of your ad fees back from Liberty Corp. Many have failed in their attempts at the tax business, with Liberty, because the combination of regular expenses and the 19% back to Liberty was unsustainable. Bottom line is revenues in most suburban, middle class territories, will never be enough to cover expenses. Be careful if you are thinking about buying into this Liberty business model.

• Not only does Liberty not provide you with any funds while demanding you hold the schools, they will also tell you, through how much to spend in marketing to achieve the sales you are striving for. It doesn’t work. Period. Think about it.. if it were THAT easy…And the marketing tactics are old and everyone is used to them. Same old game.
  This is a franchise on its way down, not up.
  Yes, there are successful offices.. but the good territories are long gone and the business model is antiquated and dieing. And the middle class will never buy into dancing clowns. An accountant is actually cheaper. Go figure.

  As far as Bloch buying 2 new territories.. I don’t believe it. Though I wish he would ;–)

  Most of the “failures” I know were business people successful in thier other endeavors. These people are NOT the loosers that LTS is making them out to be. Not even close. As a matter of fact, the smart ones recognized the situation and got the h*ll out early.

  People.. if you are looking for a franchise winner – this ain’t it.

• Please people looking at this company as a viable option in making a “fast buck” business, please heed the following:

  1. When you sign the franchise agreement, it does not spell out all the “garbage” they throw at you for in order to keep your franchise. GRR (Gross receipts report) due by the 5th of each month. Depending how big of an office, it may take a whole day of time or more to complete. You must pay that 19% ASAP even if you don’t have the money.

  2. You will NEVER, EVER, EVER be able to sell the hunk of junk in 90% of the time. So basically, you are gambling you can unload this piece of crap whenever you are ready to and make some of your money back. NO! The corporate office will drag you through the wringer on every potential buyer and they will not “qualify” for some unknown reason. So, you will just have to hole up until you can walk away and leave the customers to LTS.

  3. They state you are an Independent Contractor, however, they always try and make you do everything their way!! I am surprised that the IRS has not caught on to this little scam. They have a requirement on how many hours you work and what hours to be opened. They don’t issue 1099 on the money you made, so very strange. Most companies due, but not this one.

  4. They are nice and sweet until you sign the dotted line, then your are the devil spawn to them and must do their bidding.

  5. They are interested in anything to do with taxes, just marketing, marketing, marketing. All your classes are mainly about marketing your business, but not really learning or teaching anything about the tax code.