Executive Fraud Blog

Ignorance is NOT an Excuse for Tax Fraud

Jackson Hewitt is currently under investigation for maintaining a business environment that is conducive to filers committing tax fraud by using fake W-2 forms or taking false deductions. Allegedly employees of the franchise were told to overlook clear signs of fraud for the sake of filing more returns. As the Justice Department has begun sampling the returns filed they have found approximately 31% of Farrukh Sohail's franchises have contained fraudulent information.

A major area of most tax fraud emerges from the over use of the Earned Income Tax Credit that is designed to give large refunds to lower income tax payers. This is a large profit business area for companies such as Jackson Hewitt therefore there is a motivation to increase their return amounts. These franchises have withheld from the government approximately $70 million in tax revenue for the government.

As Internet free filing services become more popular I sense that there may be an increase in fraudulent deductions but more personal liability versus the general tax service such as Jackson Hewitt will file purely based on the information that is being provided to them. With the odds of being selected for an audit hovering around the odds of being struck by lightning, if the government wants to better compliance they must fully automate the system for the average American and make the filing process more intuitive then the current mess of rules.