Roughly 135 million Americans file tax returns, and of those, two thirds pay for help. While solo acts like CPAs and so-called enrolledagents have plenty of clients, almost 20 percent of taxpayers go through a big franchise like H&R Block, Jackson Hewitt, or Liberty Tax Service to get their refund—in 2007 costing an average $2,255 per return. Problem is, taxpreparationandadvice depend on the preparer, and in a system of franchises, that means thousands of seasonal employees and limited quality control.
The results can be dangerous. When staffers from the Government Accountability Office (GAO) went undercover to get returns done by the big chains, they found “nearly all of the returns prepared for us were incorrect to some degree,” according to the report. Worse yet, recently filed lawsuits allege that the owners of 125 Jackson Hewitt franchises cost the government $70 million in tax fraud and created an environment “in which fraudulent tax-return preparation is encouraged and flourishes,” according to the Department of Justice. Jackson Hewitt says it stands behind its compliance procedures as well as its nationally standardized educational curriculum.