Jackson Hewitt under fire

The federal government has broadened the scope of an investigation into charges that certain franchisees of Jackson Hewitt Tax Services Inc. helped prepare fraudulent tax returns during the 2006 tax filing season. More than 125 offices of the company have been accused by the Justice Department of knowingly filing false tax returns and claiming refunds that resulted from the use of phony W-2 forms and fictitious deductions. The returns were filed on behalf of middle- and low-income people. It is estimated that as much as $70 million was refunded as a result of the false tax returns.

Jackson Hewitt offices in Detroit, Chicago, Atlanta, the Raleigh-Durham area of North Carolina, and Birmingham, AL, all operated by franchisee Farrukh Sohail, have been cited in the lawsuits. Sohail and several employees at the offices have been named in the lawsuits. The lawsuits claim that employees at Sohail's offices were pressured to prepare false tax returns in exchange for bribes. Jackson Hewitt has temporarily suspended operations at most of Sohail's tax offices.

The investigation, which was originally filed in April, has been expanded to include the Jackson Hewitt corporation and all of its franchisee- and company-owned stores. The company has hired its own internal investigator, former IRS commissioner, Fred T. Goldberg, Jr., to oversee a review of the allegations. Jackson Hewitt spokeswoman Sheila Cort stated that the company is cooperating with the IRS and the Justice Department "in connection with this matter and other IRS audits and inquiries."

The lawsuits also claim the company offered shoddy training and poor oversight, and ignored reports from whistle-blowers at Sohail's offices.

Jackson Hewitt is the nation's second largest tax preparation company with 5,778 franchisee-operated offices nationwide in addition to 723 company-owned offices.