Hagens Berman Sobol Shapiro Lawsuit: Tax Payers Suffering From Fraudulent Service

SEATTLE, June 22 /PRNewswire/ -- A proposed class-action lawsuit was filed today against Jackson Hewitt Tax Service Inc. , the nation's second largest income tax preparation service, claiming that the company knowingly defrauded customers in order to maximize profits.

Jackson Hewitt provides general income tax filing services and offers a "gold guarantee" for an additional fee that claims all prepared income tax returns will be filed accurately. If that isn't the case the company states they will bear any costs or penalties a customer receives from the Internal Revenue Service (IRS).

In 2004 and 2005, named plaintiff James Chapman sought Jackson Hewitt's tax services and purchased the company's "gold guarantee." Chapman was penalized by the IRS after Jackson Hewitt filed for an improper earned-income credit and despite its guarantee did not pay the IRS fines, the complaint alleges.

"Through our investigation we believe Chapman's experience is very common among Jackson Hewitt's customers, and is part of an intentional scheme by the company in play across the country," said Steve Berman, lead counsel and managing partner of Hagens Berman Sobol Shapiro.

According to the complaint, when Chapman discovered he was being audited by the IRS, he attempted to exercise his right to protection under the "gold guarantee" but was denied any assistance from Jackson Hewitt. The tax preparation service instead accused him of providing false information, therefore forfeiting him from his protection. Jackson Hewitt held Chapman responsible for their mistake, and as such, Chapman was obligated to reimburse the IRS the complaint states.

The complaint against Jackson Hewitt goes on to say that the company did not take the proper steps to determine if Chapman was eligible for an Earned Income Tax Credit (EITC) which led him to improperly claim a refund of $4,500.

By law, earning an EITC requires that the tax payer claim a qualifying child as a dependent. In Chapman's case, the dependent did not meet all IRS criteria.

According to Berman, James Chapman was unaware that the child did not qualify as a dependent. The complaint states that Jackson Hewitt should have verified that the child met each of the IRS's criteria for determining dependency by obtaining documents and conducting an interview with the customer. Jackson Hewitt did neither, but did convince Chapman to purchase its "gold guarantee" for an additional fee of $39.00.

According to Berman, this isn't the first time Jackson Hewitt's business practices have been called into question: "They've been charged with facilitating tax fraud schemes numerous times and this sort of deception just can't continue."

The government charged Jackson Hewitt in Mich., Ga., and Illinois for similar abuses, citing that when the company knows there is chance of an audit, they recommend their "gold guarantee" and then claims that the customer is at fault, the complaint states.

"James Chapman trusted that his return was being prepared by an expert," Berman said. "Instead Jackson Hewitt blamed him for their intentional mistake and then fell through on their promise to protect him."

The complaint alleges that Jackson Hewitt violated the Consumer Fraud Act, is guilty of breach of contract, and unjustly enriched as a result of the unlawful collection of payments for their "gold guarantee."

The suit seeks full restitution for Jackson Hewitt's ill-gotten gains and punitive damages for those who were failed by the "gold guarantee."

Jackson Hewitt reports that it files 3.7 million tax returns a year, all prepared by trained individuals who know and adhere to United States tax laws. The service, which has nearly 6,000 offices and franchises in the country, promises to protect all customers if a tax return is prepared in incorrectly.

About Hagens Berman Sobol Shapiro

The law firm of Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since the firm's founding in 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit http://www.hbsslaw.com/.

CONTACTS: Steve Berman (206) 623-7292 Hagens Berman Sobol Shapiro Steve@hbsslaw.com Mark Firmani (206) 443-9357 Firmani + Associates Inc. Mark@firmani.com