Lessons from the Fraud Allegations Facing Liberty Tax Franchises

Filling out taxes at a tax location can be easier for some taxpayers. Those who are not computer savvy or who want help from experts may be more interested in going to a tax location near their home for tax preparation. Some of these tax locations spring up each year starting in January and close in late April. Some even operate in major retail locations such as Wal-Mart. Some of these locations have been in trouble recently for fraud. Here is what you can learn from these allegations.LibertyTaxPic

Catching High Return Requests

In several states, Liberty Tax has been accused of filing fraudulent returns. One of the reasons that Liberty Tax has found trouble is because a large number of the refunds were coming up with much larger federal return requests than normal. A higher return than the last year is likely to lead to audit. A higher return rate from tax stores means that the tax location may be engaging in fraud. The government will go over your last year’s taxes to see if the returns match and if anything looks suspicious.

Dependent Claims are Cross Referenced

Dependent claims are one of the biggest issues that can cause tax problems for parents. Only one parent can claim the child on his taxes per year. You must be providing 50% of the cost of care or more to claim your kids as dependents on your taxes. Dependents who were not on your taxes before can trigger an audit and Liberty Tax customers on average showed suspicious rates of new dependents.

The Best Lesson

The best lesson is that if something seems suspicious or too good to be true, it likely is. Go over your taxes before they are submitted to ensure they are accurate. Tax fraud means time in jail and you do not want to risk it over a few hundred to a few thousand dollars. If possible, find a reputable tax preparer in your area rather than one with known issues.

Image credit: Mike Mozart