Jackson Hewitt / NY Times

[Demosthenes]

June 5, 2007

Inquiry Into Jackson Hewitt’s Tax Return Practices Widens
By LYNNLEY BROWNING

Federal authorities have expanded an investigation into allegations that Jackson Hewitt offices helped prepare fraudulent income-tax returns that allowed customers to obtain refunds illegally.

The Justice Department filed civil lawsuits in April accusing more than 125 Jackson Hewitt offices of knowingly enabling tens of thousands of middle- and lower-income people to obtain $70 million by falsifying their federal tax returns. Late last week, Jackson Hewitt Tax Service Inc. disclosed in a securities filing that the company itself was the subject of an Internal Revenue Service investigation.

Jackson Hewitt said in the filing that it was cooperating fully with the inquiry. Such inquiries are typically carried out by the I.R.S.’s criminal investigations division, and if necessary handed over to the Justice Department’s civil or criminal tax division for further investigation.

The I.R.S. declined to comment yesterday.

Jackson Hewitt, based in Parsippany, N.J., is the nation’s second-largest tax preparation chain after H&R Block.

The Justice Department lawsuits raised questions over Jackson Hewitt’s supervision and oversight of its franchisees, in this case of a businessman named Farrukh Sohail, who has outlets in Detroit, Chicago, Atlanta, the Raleigh-Durham area of North Carolina and Birmingham, Ala. The lawsuits did not name Jackson Hewitt as a defendant.

But in its securities filing, Jackson Hewitt said: “The company has learned recently that the Internal Revenue Service is conducting additional examinations of tax-return preparation activities of Jackson Hewitt franchisees and company-owned stores. The company is also a subject of an I.R.S. investigation relating to these matters.”

Last month, Jackson Hewitt began an internal review of the company’s practices and procedures, hiring a retired I.R.S. commissioner, Fred T. Goldberg Jr., to oversee the review.

Mr. Goldberg, a tax lawyer at Skadden Arps Slate Meagher & Flom, was also briefly the assistant secretary for tax policy in the Treasury in the early 1990s.

In its filing on Friday, Jackson Hewitt said that it “intends to complete the internal review promptly and to implement a variety of enhancements in the areas of compliance and monitoring for the 2008 filings season.”

Sheila Cort, a spokeswoman for Jackson Hewitt, declined to comment further, adding that the company knew nothing more about the I.R.S. investigation.

The lawsuits filed against the Sohail-owned or controlled franchises said that employees had been pushed to crank out returns in exchange for bribes, to accept scant or false documents, like W-2 forms, and to falsify taxpayer data to receive the earned-income tax credit, a federal assistance program.

The lawsuits also cited shoddy training, meager oversight and the ignoring of whistle-blowers at Mr. Sohail’s stores. Jackson Hewitt temporarily suspended work at most of Mr. Sohail’s franchises.

Operators of franchises prepare returns using Jackson Hewitt’s Profiler software and then forward the returns to the main Jackson Hewitt center for approval and filing to the I.R.S.

[jg]

June 5, 2007
Inquiry Into Jackson Hewitt’s Tax Return Practices Widens
By LYNNLEY BROWNING
...
Operators of franchises prepare returns using Jackson Hewitt’s Profiler software and then forward the returns to the main Jackson Hewitt center for approval and filing to the I.R.S.

I am not personally familiar with the workings of Jackson Hewitt, but the assertion that the returns are forwarded for "approval and filing" seems to be, at best, misleading.

It does not seem practicable, and would not be standard industry practice, for the returns that are sent to the main center to get any sort of "approval" in the common sense of that word. There is error checking both at the local level and the main office done by the software; but those checks are primarily concerned with the correct formatting and internal consistency within the return of the amounts being reported. The only "approval" is that the return is able to be processed by the IRS and there is not any other sort of "approval" involved.

My understanding of the responsibility of the electronic return transmitter is that the content of the return is not in the control of the transmitter or the electronic return originator; but solely is the duty of the preparer of the return.

The national firm is much more likely to have potenital problems in the training and oversight provided to franchisees, or lack therof, than in anything to do with the fact that the returns are sent to the main center to be batch processed to the IRS.

Just one man's opinion, yours may vary significantly.

[Flyingifr]

I am familiar with the JH method of tax preparation and that statement is nonsense.

The electronic return is forwarded to a central office for batching into groups and then sent electronically to the IRS and States. No review of the preparer's work is conducted at this step since, if an error would be found, the return would have to be re-calculated, the customer would have to sign a new Form 8453 and the return re-batched and transmitted.

[gezco]

Remeber the case againts the founder of Jackson Hewit? That wasy funny.