Tax Day is Monday, America. I hope you filed your return already, and can spend the weekend enjoying the sunny weather, unstressed about your civic obligation to fill government coffers. If you haven’t, don’t worry: you still have three days. A word of advice, however: don’t file with Liberty Tax Services, which has seen an alarming number of stores shut down over alleged misconduct lately.
Last week, the nation’s third-largest tax-preparing company announced that it had asked 28 of its New York City area locations to stop preparing and filing returns for the remainder of the 2015 season, citing offices that were “not able to provide the level of service required to meet the Company’s standards.” A few weeks before that, in Baltimore, nine people associated with multiple Liberty franchises were indicted for allegedly targeting people in homeless shelters and drug rehab centers and encouraging them to file fraudulent returns. That alleged fraud is apparently indicative of a larger problem in Maryland: officials recently announced they are no longer accepting returns from 23 Liberty locations in the state. And federal authorities have asked courts to shut over a dozen Liberty locations in Michigan, California, and South Carolina for allegedly preparing fraudulent returns over the last year.
Just yesterday, reports on social media surfaced, with photos at one location, of multiple raids on Liberty Tax Services stores in Orange County, California. John Balkhi, a Liberty franchisee who operates one of the reportedly raided locations, told me that his stores remained in operation, but would not confirm or deny that they had been investigated by law enforcement. Balkhi directed me to a Liberty Tax Services corporate spokesperson, who did not return a request for comment on this story. (Neither the IRS nor the Department of Justice responded to Gawker’s requests for comment.*)
Even when tax preparation chains like Liberty aren’t committing outright fraud, you’re probably better off avoiding them. An article published by the Atlantic yesterday, which draws on research from Johns Hopkins University and the Brookings Institute, does a good job explaining how these companies can prey on the poor: basically, by setting up shop in low-income neighborhoods, preying on their insecurities about the IRS, and gouging them on fees. According to the research, chain stores charge fees for as much as 25 percent of a filer’s Earned Income Tax Credit, a tax break designed to fight poverty.
It’s a national shame that filing one’s taxes in the United States of America is so hard that most people can’t do it alone. But until Donald Rumsfeld gets his way, this is the tax code we’re stuck with. If you can afford it, hire an accountant or an enrolled agent to do your taxes for you rather than walk into a chain.
If you can’t, there are free options: For people who make less than $62,000 per year, IRS offers software called FreeFile, which is basically like an alternative to TurboTax, except you don’t have to pay anything to use it. There’s also an IRS program called VITA, which offers volunteer in-person tax preparers for people who make less than $54,000, are disabled, or speak limited English. It costs you nothing, and you’re a lot less likely to have a fraudster filing for you.
Update - 8:59pm
*Thom Mrozek, Public Affairs Officer for the U.S. Attorney’s Office for the Central District of California told Gawker, “Federal agents yesterday executed a series of search warrants in Southern California. Those warrants are under seal, so I cannot provide any substantive comment on the matter being handled by IRS Criminal Investigation.”