Jackson Hewitt, the tax preparer firm under investigation by the IRS because of alleged misconduct by 125 of the firm's offices (see this news item of the IRS involvement in the Justice Dept investigation and this earlier ataxingmatter posting), filed a Form 8-k with the SEC on September 20. According to the securities filing, the firm has made a voluntary compliance payment of $1.5 million to the IRS to settle the franchise matters under investigation. The firm suffered losses in its first quarter earnings report due in part to its internal review costs. See this item from RTT News, 9/6/07. A few days later, the firm announced that it had completed its internal review (led by former IRS commissioner Fred Goldberg) and concluded that none of its corporate employees were involved in the fraudulent activities of its franchisees. See this item.
In an interesting juxtapositioning of news items, a Miss Ezell, who had worked at H&R Block before working at Jackson Hewitt, was sentenced on September 19 to 21 months in prison and ordered to pay restitution of almost $83,000 in connection with aiding in the presentation and filing of fraudulent tax returns claiming false deductions for medical expenses, charitable contributions, and business expenses, and false claims for child credits and dependents at both firms. See this press release.
Perhaps these tax preparation firms need to spend more time ensuring that all employees, whether corporate employees or franchise employees, are properly trained and screened to ensure that they understand that fraudulent creation of deductions or dependents is simply not acceptable.