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DoJ Announces Resolved Suits With US Tax Preparer Franchisees

by Mike Godfrey, Tax-News.com, Washington

03 October 2007


The US Justice Department announced late last month that it has resolved lawsuits against corporations that operated Jackson Hewitt tax preparation franchises in Atlanta, Chicago, Detroit and Raleigh-Durham, N.C.

Under stipulated injunction orders set to take effect immediately if approved by federal judges in each city, corporations that owned and operated franchises in Atlanta, Chicago and Detroit will be permanently barred from preparing federal income tax returns.

Those corporations are selling their Jackson Hewitt franchise rights to new owners. A corporation that owns a franchise in Raleigh-Durham will continue to operate, but will be subject to restrictions and monitoring requirements contained in a permanent injunction to be entered against it.

“The Justice Department is committed to taking vigorous action to ensure that tax preparers comply with the law,” explained Richard T. Morrison, Acting Assistant Attorney General for the Justice Department’s Tax Division. “The actions announced are in the best interest of the nation’s taxpayers,” added IRS Acting Commissioner Linda Stiff, continuing: “This effort helps to ensure that taxpayers receive quality assistance when they seek the services of a tax professional.”

The government has also settled with a number of the individual defendants in the cases, including Farrukh Sohail, who owns all or part of each of the corporations holding the Jackson Hewitt franchises.

Subject to court approval, Sohail will be barred by the US District Court for the Northern District of Georgia from acting as an income tax preparer for five years, and will be subject to permanent restrictions thereafter. He is also selling his interest in the corporation that owns the Raleigh-Durham franchise.

The corporations to be barred operated under franchise agreements with Jackson Hewitt Tax Service Inc. of Parsippany, N.J., the second largest tax preparation firm in America. The government complaints alleged that the franchisee corporations “created and fostered a business environment in which fraudulent tax return preparation is encouraged and flourishes.”

The Justice Department complaints in the cases allege that Sohail-owned franchises prepared and filed over 105,000 federal income tax returns last year, making Sohail one of the largest Jackson Hewitt franchise owners.

Since 2001, the Justice Department’s Tax Division has obtained more than 255 injunctions against tax preparers and tax-fraud promoters.


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