Liberty Tax Service Faces Class Action Lawsuit

6:38 PM, Jan 3, 2011   |    comments
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Columbia, SC (WLTX) - A widely used tax filing company is being sued for allegedly falsifying documents and ripping-off the Internal Revenue Service, as well as their clients along the way.

The claims are being made against Liberty Tax Service.

Attorney Todd Ellis is among three lawyers representing local plaintiffs in a suit against the company.

"This is a national class action," says Ellis. "Where we believe this is across Liberty Tax Service, across their entire system. Liberty Tax had a plan or a scheme to bring consumers into their stores.  They have a systematic plan to increase their profits by putting [filing] false, fraudulent or inappropriate forms. Therefore, the consumer would often get back inappropriate, but larger returns."

The complaint states that Liberty Tax knowingly got their clients more money that they were owed in hopes of getting what many call the best type of advertisement there is: word of mouth.

Ellis says, "Liberty Tax would then benefit because customers would go on to tell others that their returns were larger. Thus, getting others to come into the store."
The complaint states that the company got their clients extra money by claiming things like unreimbursed business expenses, or charitable donations, without the clients knowledge.

"Many tax service customers often don't receive copies of their tax returns until after they're audited."

There are eight Midlands plaintiffs involved in this class action suit. Couples Kenneth and Myra Martin, David and Catherine Goodwine, and Terry and Amanda Allen, all of Richland County.  There is also a couple from Newberry County, Jeffrey and Tawanna Reid. 

Ellis believes more people nationwide may have similar experiences.

"The class could represent hundreds of thousands of consumers because Liberty Tax Service provides 3,800 stores across the United States, and 70 in South Carolina."

Ellis says the clients only discovered that improper paperwork was filed after they were audited by the IRS. The IRS made the plaintiffs pay back the overpaid money, plus added penalties and fees.

A spokesperson for Liberty Tax offered the following statement regarding the lawsuit. Martha O'Gorman said, "We don't believe this case has any merit. It is our policy not to comment on any details of pending litigation."

News19 asked a tax consultant with the IRS how a person can safeguard themselves during tax time, and find a qualified tax preparer.

"If somebody that you go to, a tax professional, starts preparing your tax return, [and] they've not looked at all your documents, they've not asked you a lot of questions, [you should] be real concerned," says Joyce Robbins. "Make sure that you are not using somebody who is offering you a bigger refund.  That is a red flag if there ever was one."

Robbins also suggests you review and agree with every paper that is filed.  If there is a mistake on a form that was filed by a tax preparer, the responsibility still falls on the taxpayer.
For more tips on finding a qualified tax preparer, go to IRS Newsroom or IRS Video.

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