Justice Department Files Tax Fraud Suit Against Instant Tax Service

Justice Dept LawsuitEarlier in the year, we wrote about Instant Tax Service (ITS) and the troubling practices at their franchises across the country. It seems the U.S. Department of Justice (DOJ) also took notice, and has now filed suit, accusing ITS of “deliberately ignoring systemic and pervasive fraud by ITS franchisees.”

DOJ filed complaints against ITS headquarters in Dayton, OH and franchises in Chicago, Indianapolis, Las Vegas and Kansas City, KS.

According to the suit, ITS franchises – together the 4th largest tax preparer in the country – intentionally prepared and filed tax returns with false information in order to inflate their customers’ tax refunds.

They then used these refunds to charge customers “outrageously high” fees. The DOJ press release included an example of a $1,000 fee to prepare a return in 15 minutes.

For those who have been in our field for a while (or a short time), this may sound like business as usual. But it gets worse.

From the DOJ press release:

  • The franchisees named in the complaints allegedly invent phony businesses, fabricate deductions, falsify filing statuses, claim bogus dependents and disregard rules for claiming the earned income tax credit.
  • ITS employees at these franchises allegedly have little tax preparation experience and that the franchise owners encourage them to prepare fraudulent tax returns or are aware that the employees do so.
  • ITS stores lure their mostly low-income customers by offering loans that the government asserts are false and deceptive, allegedly encouraging their customers to apply for loans knowing that certain customers do not meet the undisclosed criteria to qualify.
  • Although customers allegedly believe they are merely applying for loans, the government asserts that ITS franchisees and return preparers routinely file tax returns without having customers’ Forms W-2 and without the customers’ authorization.

With so much coverage this year on tax scams, it seems pertinent to reiterate our support for new paid preparer requirements that we successfully advocated for and are now being fully implemented by the IRS. Among many other benefits, the new regulations will allow for easier tracking of problem tax preparers.

The DOJ has successfully sued and shut down ITS franchises in the past. Let’s hope if its claims against ITS are indeed true, the same happens here.

By Dan Fair, Manager of Communications & Member Relations

About National Community Tax Coalition

National Community Tax Coalition (NCTC) is the nation's largest, most comprehensive membership organization for community-based organizations offering free tax and financial services to low-income working families.

Posted on March 29, 2012, in NCTC and tagged , , , . Bookmark the permalink. 1 Comment.

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