Jackson Hewitt

Jackson Hewitt Tax Service, Inc.

Type	Private
Founded	Norfolk, Virginia USA, (1982)
Headquarters	Parsippany, New Jersey USA
Key people	President and CEO: Phillip H. Sanford;[1] Executive Vice President, Chief Financial Officer and Treasurer: Daniel O'Brien; SVP Franchise Operations and Sales: Duane R. Mora;
Products	Financial Services Tax Preparation Refund anticipation loans Franchises
Website	www.jacksonhewitt.com

Jackson Hewitt office, Wayne, Michigan

Jackson Hewitt Tax Service Inc. is the second largest tax preparation service in the United States; responsible for preparing over 2.2 million computerized federal, state, and local individual income tax returns each year. Based in Parsippany, New Jersey, the company currently operates more than 6,800 franchised and company-owned locations throughout the United States, including 2,800 located in Walmart stores nationwide, and more than 400 Sears stores in the United States and Puerto Rico for the 2013 tax season. Jackson Hewitt offers free electronic filing, tax-preparation training, and tax audit representation.^[2]

In January 1998, The Cendant Corp., a consumer conglomerate, purchased Jackson Hewitt in a deal valued at approximately $480 million.^[3] In 2004, Jackson Hewitt Tax Service Inc. was spun off as a separate company.^[4]

History

Founded

Jackson Hewitt was founded in 1982. The Company was assembled with a variety of investors who purchased the six-location, Norfolk, Virginia-based Mel Jackson's Tax Service and renamed it Jackson Hewitt.^[5] For the next few years their company grew slowly, adding a handful of additional outlets.

Expansion

In 1986, the same year the IRS first began to experiment with computerized tax filing, Jackson Hewitt began selling franchises.^[6] By the following tax season there were 22 offices. Then in October 1989 the Montgomery Ward department store chain contracted with Jackson Hewitt to open offices in 169 stores across the United States. Ward’s rival Sears had for years been host to H&R Block in its stores. Unfortunately, the sudden growth was too much for the burgeoning company to handle and so, to avoid entering bankruptcy during tax season Jackson Hewitt closed 67 of those offices. But by the end of 1990 the company had returned to profitability, however, and even opened more locations in Montgomery Ward stores.

By 1992 Jackson Hewitt had 515 offices in almost to 30 states and was preparing 311,000 returns for taxpayers per year. Making it second largest tax preparation chain in the United States. During The following year the company raised funds for expansion and moved into new headquarters in Virginia Beach, Virginia. And by 1993, the company had 900 offices in 37 states. In January 1994 the company went public but no new stock was issued, and the company's 700 investors' private shares simply converted into public ones. During that same year Jackson Hewitt made a deal to set up offices in Sam's Club stores on a trial basis. The trial was a success, and later that year Jackson Hewitt launched plans to establish 18 offices in Wal-Mart stores, leasing space for use as combined tax prep and business mail service sites.

Cendant

In December 1997 Jackson Hewitt announced that it was being acquired by HFS Inc. for $480 million. Before the sale was complete, HFS merged with another firm and changed its name to Cendant Corporation. Cendant owned a number of franchise operations, ranging from Ramada Inn, Days Inn, and Avis Rent-A-Car to chains like Coldwell Banker and Century 21. Under Cendant Jackson Hewitt opened a total of 1,000 new offices, and started experimenting with kiosk locations in shopping malls and offices at Century 21 real estate agencies. Following the 1999 tax season Jackson Hewitt moved its headquarters to Cendant's home base in Parsippany, New Jersey and started acquiring of independent tax preparation offices through its largest franchisee, Tax Services of America. Meanwhile, founder John Hewitt's Liberty Tax Service had grown into the third largest tax preparation chain in the United States

Starting in 2001 Jackson Hewitt began opening offices in Kmart stores. 2001 also saw the launch of several new initiatives, such as the issuance of MasterCard cash cards – so that their customers would have easier access to accelerated refund accounts – as well as the creation of a Premier Tax Service for complex returns. Some Jackson Hewitt locations began to offer ATMs where clients could cash their refund checks on-site, as well. Independent tax service acquisitions continued throughout the year, with more than 3,300 offices, owned by 600 franchisees.^[7]

By year's end the company was handling 2.2 million tax returns a year.

At its peak

Jackson Hewitt was the second largest tax preparation firm in the United States, Jackson Hewitt Tax Services Inc. The firm prepared some 3.4 million tax returns for low- and middle-income customers through more than 7,400 franchised company-owned offices, including locations within Kmart, Walmart Stores and mall kiosks.

Jackson Hewitt maintained two business segments: its franchise operations – consisting of its franchise business and associated royalty, marketing-advertising revenue, financial product fees and other revenues and its company owned income tax return preparation offices. During 2008, Jackson Hewitt maintained company-owned offices in 28 markets across the United States and 5,763 franchised offices – responsible for preparing 87% of the total number of tax returns prepared by its network. Jackson Hewitt Inc. operates as a wholly owned subsidiary of Jackson Hewitt. Its company-owned office operations are conducted through a wholly owned subsidiary of Jackson Hewitt Tax Services Inc., Tax Services of America, Inc.

In 2008, the company partnered with the Magic Johnson Foundation to create Community Empowerment Centers that offered comprehensive tax information seminars and financial educational resources in Sacramento, Houston, Chicago, New Orleans and Cleveland. The free seminars offered individuals in underserved communities basic tax information and budget planning resources. For instance, each attendee received free access to the Jackson Hewitt Money Manager, a Web-based home budgeting tool that helps users create and manage a budget and a detailed savings plan.^[8]

Default

The company negotiated out of a default on its debt in May 2009 and technically defaulted for several days in May 2010 (though an agreement with creditors was announced within one week of the 'default').^[9]

On May 4, 2011 the company announced it had agreed to a 20-day extension of its debt under its various credit agreements with Wachovia/Wells Fargo Bank. The company mentioned at that time that it was considering many options including a prepackaged bankruptcy filing. On Friday, May 20, 2011 the extension expired and the company had yet to file for bankruptcy protection or to announce another extension of its debt.

On May 7, 2011 Jackson Hewitt ceased being traded on the New York Stock Exchange. The ending share price was $.19. On May 9, 2011 the symbol for the stock was changed from JTX to JHTX and is being traded on a different stock exchange. On Tuesday, May 24, 2011, Jackson Hewitt officially filed for bankruptcy.^[10]

In August 2011, Jackson Hewitt became a privately held company under the direction of Philip Sanford, President and CEO, and Board of Directors.

Investigation

On April 3, 2007, the United States Justice Department announced that the federal government had filed civil injunction suits alleging tax fraud by five corporations owned or partly owned by Farrukh Sohail. According to the four lawsuits filed in federal courts in Chicago, Atlanta, Detroit and Raleigh, N.C, the corporations operate under franchise agreements with Jackson Hewitt Tax Services Inc.^[11] On September 28, 2007 the Department of Justice announced that it had reached settlements with each of the defendants in the case. Under the settlement agreements the majority owner, Farrukh Sohail, of each of the businesses will be barred from preparing tax returns for five years,^[12][13] roughly 15 of Mr. Sohail's employees have been permanently enjoined from preparing tax returns. Neither Mr. Sohail nor his incorporated businesses will pay any financial penalties under the settlement agreement, indicating that the fraud committed was not done with the consent of senior management in Mr. Sohail's business.^{[citation needed]}

On September 6, 2007 Jackson Hewitt said that their internal review found no evidence its employees knew of the scheme that led to U.S. Department of Justice lawsuits. The internal review, led by former IRS Commissioner, Fred Goldberg: "...did not find evidence of corporate employee participation in, or knowledge of, the allegedly fraudulent tax return preparation activities."^[12]

Today

Jackson Hewitt is currently led by Philip H. Sanford, President and CEO. With a more than 30-year career in finance, senior management and franchising, Mr. Sanford joined Jackson Hewitt in 2010. The Company is privately held by Bayside Financial. Jackson Hewitt has a strong retail presence, having been named Vendor of the Year for Walmart, and effective tax season 2013, will be expanding its presence into Sears throughout the U.S. and Puerto Rico.

Products and services

Tax return preparation: Jackson Hewitt provides its customers with tax return preparation services and electronic filing. Through the use of their tax software, ProFiler, the company provides computerized federal income tax preparation, state income tax, and individual tax preparation services.

Franchise sales

The company supports more than 5,763 franchise locations throughout the United States. Start up costs range from around $50,000 to $100,000 per franchise. Jackson Hewitt continually invests in technology, people, and solutions to provide franchise owners with comprehensive support for approved Jackson Hewitt products, software, and computer hardware. The Company offers an online Support Center, as well as a fully staffed team of professionals trained to respond to software and technology needs in a timely manner. The online Support Center also provides remote assistance, email, chat and phone support.

Tax School

Jackson Hewitt offers Tax School throughout the country with two ways to learn: In a classroom or online, through the University of Phoenix. Jackson Hewitt is an IRS Approved Continuation Education Provider.

References