Itemized vs. Standard Deductions

Each year taxpayers have the choice to take a standard deduction or to itemize their deductible expenses. This is usually a pretty simple decision. If your itemized expenses exceed the standard deduction for your filing status, complete schedule A and deduct the itemized amount.

For residents of Georgia (and possibly other states), the state’s standard deduction has largely remained constant with little or no adjustment for inflation. This creates a widening gap between the federal and state amounts for standard deductions. A Georgia resident who itemizes on their federal return must itemize on their Georgia return and taxpayers who take the standard deduction must also take the Georgia standard deduction. The quirk is that while Georgia allows 100% percent of the itemized deduction to reduce Georgia’s taxable income, Georgia only gives a standard deduction that amounts to one-quarter of federal deductions for most filing statuses (Single taxpayers are afforded about 40% of the federal amount).

This means that some taxpayers whose itemized deductions exceed the state but fall short of the federal standard deductions may save a few dollars by taking the smaller itemized deduction in lieu of the federal standard deduction.

The following chart shows the ‘break-even’ points at which residents of Georgia may prefer to itemize for each filing status and federal tax rate. The chart assumes a flat 6% rate for Georgia taxes and disregards any additional deduction for age or blindness.

Federal Rate - Dollar Amount (rounded to nearest dollar)

Single ($5,700 Fed - $2,300 State standard deductions)

10% - $4,425
15% - $4,729
25% - $5,042
28% - $5,100
33% - $5,177
35% - $5,202

MFS ($5,700 Fed - $1,500 State standard deductions)

10% - $4,125
15% - $4,500
25% - $4,887
28% - $4,959
33% - $5,054
35% - $5,085

MFJ ($11,400 Fed - $3,000 State standard deductions)

10% - $8,250
15% - $9,000
25% - $9,774
28% - $9,918
33% - $10,108
35% - $10,171

HOH ($8,350 Fed - $2,300 State standard deductions)

10% - $6,075
15% - $6,621
25% - $7,179
28% - $7,282
33% - $7,419
35% - $7,464

Tax software makes this easy to see which method is more advantageous. If you have any questions, you should contact a tax professional.

Year-End Housecleaning For Individuals

Yesterday I explained the recommended holding periods for documents as it applies to businesses. For the most part, the statute of limitations is similar for individuals. The result is that supporting documents should be kept for 7 years.

There are a couple of additional pieces of information that merit mention. It is advised that you keep a copy of your W-2s until you begin receiving social security benefits in the event that there is some question about your work record as it relates to your benefit calculation.

For capital gain and loss calculations you need to be able to establish your basis as it relates to capital assets. This means all purchase information regarding your investments need to be retained for as long as you own the asset and for 7 years after disposition.

As always, if you have any questions about the length of time to maintain adequate records, consult your tax professional.

Year-End Housecleaning

This time of year I am often asked about record keeping requirements. As people are cleaning out offices and storage space a common question is ‘How long should business owners keep their supporting documents for tax purposes?’

For income tax purposes, the minimum amount of time a business should retain its documents is 3 years. This 3 years period assumes all tax returns were timely filed, were not fraudulent and there is no understatement of income in excess of 25% of the gross income shown on the return. The statute of limitations does not begin until a return is filed, so if a business is not filing returns those records should be kept until 3 years after the return is filed.

If there is an understatement of income that is more than 25% of the gross income shown, the IRS has 6 years to audit assess additional tax. If a business is claiming a loss for worthless stock or bad debt, the period of record retention is 7 years.

For this, reason it is advised that businesses keep all supporting documents a minimum of 7 years.

There are some other items that should probably be kept even longer. For example, items of support for depreciable property should be kept for 7 years until after the property has been disposed. After all, if your 2008 tax return is audited you may have to prove that current depreciation is being properly calculated for assets placed into service more than seven years earlier. Businesses will also want to be able to prove that sold or disposed assets are properly reported until the stature of limitations expires.

For payroll tax purposes, all supporting documents (timesheets, employee W-2’s, form 940s, 941s, etc.) should be kept for 4 years past when the tax comes due or is paid whichever is later. So for unpaid payroll taxes the clock doesn’t start ticking until the balance due is paid in full.

Electronic records are acceptable, so if space is the main issue of concern converting paper documents to some electronic medium may allow businesses to free up space.

As you wind down your 2009 activities, I hope this helps you make space to have a worry free 2010.

What Should Employers Do With Unclaimed Wages?

Recently, I have been asked what employers should do with an employee's final paycheck when that employee has quit, moved away, or otherwise can not be located. The Georgia Department of Revenue provides guidelines on what to do with those unclaimed wages as prescribed by The Disposition of Unclaimed Property Act.

In Georgia, if an employer still holds a paycheck and has lost contact with the employee, the employer must remit the paycheck to the state after one year. The employer must submit Form UP-2C which lists the employees name, address and social security number as well as the amount of wages being remitted.

Some basic information about unclaimed property can be found here.

The forms used by employers to submit to the state along with the wages are found here.

Stop Dieting. Start Paying Taxes.

No, that's not Weight Watchers' new slogan. A new soda tax proposal was put forth in the New England Journal of Medicine. This proposal calls for a 1 cent tax per ounce on sodas and other sweetened drinks. The proposal author estimates that the tax would generate $15 billion in new revenue. That requires 1.5 trillion ounces of soft drinks to be sold. That's a lot of soda!

The authors also suggest that the tax would result in a 2-pound weight loss for soda drinkers. At $16.95 a month Weight Watchers really is a bargain.

Should Tax Credit For First Time Homebuyers Be Extended?

Henry Unger has a blog entry about the First Time Homebuyers Tax Credit which is set to expire in November. Interestingly, he also has a blog entry discussing that foreclosures have hit an all-time high in the city of Atlanta.

Census.gov has some homebuying statistics that certainly aren't indicative of the credit serving its intended purpose. If it doesn't appear to be working, why does the National Association of Realtors insist on having us urge Congress to extend it?

Maybe Big Daddy Kane Was Wrong.

I posted earlier this year how prophetic the rapper was about Pimpin'. However, according to ACORN pimpin may actually be easy.

What Should Obama Do?

According to a recent poll conducted by market research firm Synovate, more than one-third of those polled that the Bush tax cuts which are set to expire should be extended. Obama most likely will allow these cuts to expire based on his campaign and recent speech before Congress.

I am unfamiliar with Synovate, but the question posed seems strange. The question posed was: Pollsters say the President Obama is on the verge of losing control of his presidency. What should he do to get it back on track? The four possible responses were all over the place.

35% said he should continue the expiring Bush tax cuts.

33% said whatever it takes to pass healthcare reform.

17% said propose another major stimulus spending package.

15% said immediately withdraw all troops from Iraq.

I find it interesting that one-third think he should do whatever it takes to pass healthcare reform since this proposal is so widely unpopular and may be viewed as what is putting Obama on the verge of losing control of his presidency. The most recent Rasmussen polls indicate that 40 percent of Americans strongly oppose Obama's healthcare reform plan while only 30 percent strongly favor the proposal.

Maybe if Obama wants to get his presidency on track he should stop trying to be the world's most powerful insurance salesman.

State Revenue Down 14% in Georgia

Gov. Perdue is citing the state's grim economic picture for the loss of 25% of many of the state's agencies. The AJC reports that revenues for May 2009 were about $212 million less then May 2008.

Is the beast finally starving? Don't hold your breath.

The Pitfalls of Paying Taxes on Income Earned Illegally

No, this isn't another posted about pimping or prostitution. The AP reports that a prosecutor has seized thousands of tax records from an income tax preparer popular with Hispanics in Greeley, Colorado. In the search of 4,900 tax returns as many as 1,300 suspected illegal immigrants were discovered and now face deportation.

As I posted earlier, the IRS expects income from all sources, including illegal activity, to be reported. What is not granted is immunity from further prosecution in regards to those illegal activities. To be clear, most (if not all) of the 1,300 suspects were not involved in criminal careers such as pimping and prosecution. They are accused of being undocumented or using someone else's identity. The AP dispatch mentions that 70 people face charges of identity theft in the sting.

The other issue in this story is the means the prosecutor used to secure his evidence. The ACLU likened it to a 'house-by-house search of innocent homeowners in order to find a suspect believed to be in the neighborhood'. This is scary for me personally. It marks the first time I have ever agreed with the ACLU. Two judges also agreed which lessens the blow to my paradigm for understanding legal issues. The judges ruled that the prosecutor had no probable cause to seize the records. That decision has been appealed.

It will be interesting how the appeals are decided for two reasons. First, will this give prosecutors in other jurisdictions a tool to use against illegal immigration. Secondly, will the federal and state governments notice a decline in tax revenues. From 1996-2003 filers who used ITINs (numbers assigned by the IRS to those without Social Security Numbers) paid $50 billion in taxes.

My favorite part of this story is Maria Eugenia Rey's comment, 'If it's a crime to pay taxes, then the IRS should also be charged because they're the ones who gave us the ITIN.' To be clear, the crime involved is not paying taxes. It makes me wonder if this will give the tax protestor crowd any ideas.

The Memory of Filing the Proper Paperwork is Seared, Seared into Him

The AP is reporting that John Kerry has an IRS tax lien filed against his 2004 presidential campaign. The campaign was notified by the IRS that it failed to filed payroll tax forms for 2004. Spokeswoman Whitney Smith says, 'This is a clerical matter, nothing more, nothing less.' She said the IRS must have lost the payroll forms since the Kerry campaign filed them in 2005.

If Kerry says he filed, how could one argue? After all, filing tax documents are memories that become 'seared - seared into me' just like that Christmas in Cambodia.

$60 Million for 3,000 Jobs

It was announced Monday that NCR will move its headquarters to Georgia from Dayton, Ohio. The AJC also reveals that the state will spend $60 million dollars in tax credits to lure them here. In order for those tax credits to be triggered, NCR must have a payroll in excess of $150 million dollars.

State officials are downplaying the role of the $60 million tax incentives. Gov. Perdue spokesman Bert Brantley said it was a matter of treating NCR like a customer. When's the last time you felt treated like a customer by your state government.

NCR executives also downplayed the role tax breaks played in the decision. CEO Bill Nuti said the skilled labor force is the number one reason for the transition.

So if the state and the company both agree that the tax breaks weren't significant in the decision making process how did they arrive at $60 million? Ohio's best offer was $31.1 million. The income tax that employees will pay on $150 million in salaries will take nearly seven years to reach $60 million. If the 3,000 jobs are filled by Georgians that will help with the unemployment rate. More likely many of those jobs will be filled by people from outside Georgia which will not help the unemployment rate but should help a struggling housing market.

Luring businesses to your area has become a focal point of state and local politics, but $60 million seems a high price to pay. After all $60 million doesn't grow on trees.

The Ox is Getting Credit For Saving Gwinnett County Residents From Increased Property Taxes..For Now

The Gwinnett Daily Post reports that Gwinnett Commission Chair Charles Bannister decided to table the milage rate vote after consulting with current Insurance Commissioner and candidate for Governor John Oxendine. The Oxendine camp is quick to seize the opportunity to make people forget about his campaign problems. 'That's the kind of leadership John would provide statewide as Georgia [Governor]' Oxendines' chief strategist Jeff Breedlove said.

The tax protest is still scheduled for 7 p.m. tonight in Suwanee and will feature Oxendine and gubernatorial candidates Karen Handel and Eric Johnson as speakers.

It's Only A Tax Increase If the Republicans Recommend It.

This WSJ editorial discusses the post-November change the Obama administration has made concerning the taxation of health insurance benefits.

I can hardly wait for the pearls of wisdom coming from Joe Biden's mouth about this.

Gwinnett County Commission Backs Down

Jim Galloway reports that Gwinnett County Commission Chairman Charles Bannister is going to table the proposed 25% increase in property taxes. Bannister said 'We have heard the message sent to us by the citizens.' However, if the June 1st Tax Protest has not been tabled he may not have heard anything yet.

Fun With Deficits

The Center on Budget and Policy Priorities has some tables showing the current and projected budget gaps for states that face budget deficits.

Interesting to me is the 9 states with no income tax have a combined projected budget gap of $15.2 billion. The three states (New Jersey, New York and California) with the highest tax burden as determined by the Tax Foundation also have the three highest projected budget gaps for 2010. California's projected deficit of $33.9 billion is more than double the combined gap of the states with no income tax. New Jersey and New York face more modest deficits of $7.0 billion and $17.9 billion, respectively, though that still places them 2nd and 3rd in size.

At what point do states stop to think if high taxes are really the solution to overspending?

If You Don't Like Rich People Just Tax Them Out Of Your State II

Maryland has lost one-third of its millionaires from a year ago. In 2008, Marland had 3,000 million dollar income tax returns filed by the end of April. In 2009, that number dropped to 2,000 according to a WSJ editorial. For sure, many of these taxpayers are still Maryland residents whose incomes dropped below one million dollars because of the recession, but it is bad policy to depend more and more on the wealthy to fund bloated governments.

It's interesting to note that three of the most heavily taxed states (California, New York and New Jersey) are experiencing huge budget deficits while the 9 states with NO income taxes are largely faring well.

State governments need to consider three things when they adopt a 'soak the rich' tax policy:

1. Do you want to create an environment where the wealthy are inclined to move out?
2. Do you want to create an environment where wealthy out-of-state residents are discouraged from moving in?
3. Do you want to create an additional incentive for residents to legally shelter or deferr income recognition?

Each of these three scenarios would also adversely impact a local government's ability to collect tax revenues related to property and sales taxes.

If You Don't Like Rich People, Just Tax Them Out Of Your State

There may be a battle forming in the New Jersey GOP primary for Governor. According to this WSJ editorial, Steve Lonegan is proposing a flat tax in lieu of the existing graduated income tax. New Jersey has one of the highest tax burdens in the country. Lonegan's plan would at the least make it one of the least burdened states in the northeast which is important to note considering the ease with which residents can move. The editorial says that New Jersey has suffered the nations 4th highest rate of out-migration of all the states. Lonegan doesn't want residents who are expected to fund many of the tax revenues to move out of the state's tax reach which is the main idea behind a low (2.98%) rate on each taxpayer's first dollar of income.

It will be interesting to watch how the current frontrunner Chris Christie will continue to attack the flat tax as a tax on the poor without being perceived as Republican engaged in the typical Democratic strategy of class warfare.

I Thought You Were Republicans...Whatever Those Are.

The AJC reports on another county that is proposing a tax rate increase. This time it's Gwinnett County resident's turn to complain about a possible 25% increase to property tax rates. The county is claiming it has lost revenues of $839 million dollars over more than a decade by not raisng the millage rate. The county doesn't mention that new construction and increased assessments have occured during the same time.

The best quote comes from Peter Henrickson of Duluth, 'I thought you were Republicans.' The fact that any members of the commission are Republicans means they will spend other people's money like a drunken sailor while they hold office and then bemoan any spending or tax increases when they are voted out.

Oddly, neither this article nor last week's article mentions anything about a county financed baseball stadium. You can read how the stadium (and a 25% increase in property taxes) will pay for itself from day one here.

Tax Increases to Lobby for More Tax Increases?

The Atlanta Journal-Constitution reports that taxes are paying $25 million in lobbyists salaries. Almost one-fourth of the more than 1600 peopled registered to lobby during the 2009 session represented either state funded agencies or local governments. As Rep. John Lunsford of McDonough says, 'The only person without a damn lobbyist is the taxpayer.'

I have no problem with lobbying in general. I do not believe that spending money to petition the government is tantamount to 'buying' politicians. There is something, however, that rankles me about taxpayers' money being used to lobby positions that are often against the taxpayers best interest. As Jared Thomas of the Georgia chapter of Americans for Prosperity says, 'Essentially what you've got is tax dollars being used to send people to the state Capital to lobby lawmakers to raise their taxes again.'

There were many valid reasons to oppose Glenn Richardson's plan to eliminate local property taxes in the state of Georgia. Local governments using taxpayer money to ensure property taxes were not cut shouldn't be one of them.

More Property Tax News

Pickens County Chief Tax Appraiser Roy Dobbs says the property tax value freeze is confusing and will be a long term disappointment to property owners. According to Dobbs there are a few 'nothing is set' and 'wait and see' items creating confusion for tax offices across the state. I think this can be interpreted as we know how much money we have to collected, now we have to do the 5th grade math to calculate our millage rate. The lawsuit filed against DeKalb county may give other counties an indication of how much leeway they have.

He freely admits that "Property taxes are not frozen....it's only the assessments." It probably is reasonable to believe that most Georgians will not see a decrease in their property taxes and many in fact may pay more than prior years.

The most frustrating thing about the tax appraiser's comments is this: 'Tax bills are dictated by budgets.' This isn't really news, but it still is frustrating. Every business and household starts with projected available resources and budgets how to spend, but local governements create a spending plan and then work backwords to shake the revenue out of the taxpayers' pockets.

Is it any wonder that surveys typically reveal property taxes are the most hated of all other types of taxes?

Collapse of Real Estate Values Equals 4% Decline in DeKalb County

According to the AJC, the DeKalb County Tax Assessor is being sued for failure to follow to new laws relating to property tax values. The Georgia Legislature recently enacted a law mandating that the effect ofproperty foreclosures are to be considered when valuing a property's appraisal and instituted a freeze on increased property values on unimproved homes.

When the original report was released in April the tax assessor had values rising apparently in violation of the mandated value freeze. The newer report released had a decline of 4%. I have no strong opinion on whether this is accurate or not but if the world is ending and real estate has 'collapsed' it seems it would warrant a larger than 4% decline. Also, I'm not sure if a lawsuit is the appropriate means to solve a disagreement over property values although the tax assessor should be in compliance with the law.

This illustrates one of the pitfalls of property taxes in general. Historically, property taxes have been universally hated even more so than income taxes. This is partially explained by a lack of transparency. Tax jurisdictions pat themselves on the back for maintaining low rates. However, those jurisdictions often institute 'backdoor taxes' by arbitrarily raising the base value to which those millage rates are applied.

The DeKalb County School System's tax base is almost entirely dependent upon the property taxes collected. The 2010 school budget assumes a 1.7% deline, but it is probably very likely there will be deeper cuts.

Property owners have until June 19 to file an appeal based on their property's assessment. Expect a bottleneck of appeals this summer. In the end, it may not matter since the millage rate doesn't have to be set until June 23.

Maybe Glen Richardson was onto something.

The Tax Men Cometh

The May issue of CFO has an interesting article about the aggressiveness of some states to make up budget shortfalls by going after out-of-states businesses. Of particular interest (to me at least) is Georgia's revenue policies and systems are influencing companies to locate or expand operations here (#5 nationally). I also notice that many of the northeast states, Michigan, Illinois and California are viewed very negatively and causing concern for future operations by survey participants. It will be interesting to see how future legislation and tax enforcement affects economic performance in many of these states with negative reputations.

I hope to have more information on this subject in future posts.

Pimpin' Ain't Easy

In edition to Big Daddy Kane's list of the perils of pimpin' you can add paperwork and payroll compliance.

This should serve as a reminder to all associated with the world's oldest profession that the IRS wants its payroll and income taxes to be paid. In fact, the Internal Revenue Code explicitly states all income from illegal activity is taxable. In the case of prostitution it most probably belongs on Schedule C although it is less clear what the line for 'Principal business or profession' should contain.

The Adulation Is So Loud - It's Like Three Cheerleading Squads

There was a three-for-one special at the Associated Press this week. The following headlines were used to describe the same news story (in order as they appeared):

Obama To Target Tax Evaders

Obama To Close Tax Loopholes

Obama To Raise Taxes On Multinational Companies

The first headline which was changed by mid-morning on Monday is terribly inaccurate. Sure, Obama is going to increase the number of IRS agents by 800 according to the story, but this is nothing more than editorializing in a poorly written manner. Imagine you argue there should be no federal deduction for state income taxes paid, as the Heritage Foundation has. You could base your arguments on the fairness between taxpayers in states with income taxes and those without. (Note: As a result of this argument, Congress began allowing a deduction for either state income tax or state sales tax several years ago.) You could also argue that the federal government should not subsidize state budgets and in this manner force states to be judicious with their residents' money. (Note: Many states actually argue along the lines of 'Well, sure we are taxing you at 10% but for those in the 25% federal bracket it is effectively only 7.5%) What cannot be claimed, however, is that all taxpayers who deduct state income taxes on their federal return are tax evaders. A tax evader is someone who illegally minimizes his income either by unreported income or falsely reporting expenses. See Tim Geithner, Tom Daschle or Charles Rangel for examples.

The second headline isn't quite as bad as the first, but is still misleading. It calls the current tax policy a loophole. Tax loopholes generally discribe ambiguities in the tax code which have unintended consequences. These ambiguities generally occur to the chagrin and embarrassment of lawmakers. An example was found in Arizona around 2000. Due to pressure from environmentalists, the state gave a tax credit for vehicles that ran on alternative type fuels. What the state didn't initially expect was for every golfer in the state (and some non-residents) to purchase golf carts for their hobby and receive the credit. I beleive that loophole has been closed through more specific language. What this AP article describes isn't a 'loophole' because a lawmaker or committee used some vague terminology but a law in which the AP disagrees.

The final headline calls Obama's plan for what it is - an increase of taxes. Did a capitalist infiltrate the AP? By the way, no industrialized nation has a tax on income similar to what Obama is proposing. The article notes that most corporations pay an effective rate of about 25% on domestic activities but only a 4% rate on foreign activities. You have to love the disclaimer that notes this doesn't take into account foreign taxes paid. I suppose the AP is arguing that companies should pay 25% overseas and another 25% to Washington and if the company operates in many nations there could potentially be a greater than 100% tax rate. That would turn the 'loophole' into a noose for most companies.

Tax Increases Aren't the Only Way to Eliminate a Deficit

Kelly McCutchen at the Georgia Public Policy Foundation reminds Georgians that it could be worse; we could be residents of New York or California. McCutchen writes that the state's spending for 2008, 2009 and 2010 is projected to be $38.5 billion, $37.7 billion and $38.8 billion, respectively. At a time when so many are calling for increased government spending, Georgia has been able to avoid uncomfortable tax increases due largely to restricted spending.

Readers are given charts detailing state spending by revenue source, state spending against population and inflation and state education spending per student. A study by the American Legislative Exchange Council is referrenced in which the following conclusion is reached: 'The historical evidence is clear. States that keep spending and taxes low exhibit the best economic results, while states that follow the tax-and-spend path lag far behind.'

Keep that in mind the next time a politician advocates a tax increase as the only solution during a down economy.

You Mean All the Raindrops Aren't Lemondrops and Gumdrops?

The last sentence in this AP dispatch reads as if it's newsworthy if Obama fails to garner 100% support for his agenda. The first seven paragraphs lead one to believe that Obama is some sort of superhero for raising taxes. The final sentence admits that 'Congress is expected to resist significant portions of Obama's plan.'

One probably shouldn't be surprised that acknowledging there may be resistance to a proposal is what passes as 'hard-hitting journalism' with displays such as this. Unfortunately, you can't see Helen Thomas waiving her pom-pons because everyone is standing. But just think what a happy place it will be when Obama makes all the raindrops lemondrops and gumdrops!

Ve Have Vays Ov Making You Talk.

Imagine if George W. Bush during the past eight years had said the following: 'If countries and institutions won't cooperate with us, we will assume that they are harboring terrorists and act accordingly.' If that had been said you would imagine a Keith Olbermann-type to say something like:

We have handed a blank check drawn against our freedom to a man who may now, if he so decides, declare not merely any non-American citizens "Unlawful Enemy Combatants" and ship them somewhere -- anywhere -- but may now, if he so decides, declare you an "Unlawful Enemy Combatant" and ship you somewhere - anywhere.

How long will it be until Olbermann goes on a similar rant now that Barack Obama has said, "If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly."

Just remember the burden of proof now falls on you to prove your innocence.

Does Jackson Hewitt's Claim Comply With the Law?

9 out of 10 customers receive a refund, according to Magic Johnson. I'm not sure if that claim is accurate. It may, though, be in violation of the law.

According to Reg. §301.7216, tax return preparers are generally not allowed to disclose tax return information even in a statistically compiled manner that would not identify any taxpayers directly. The limited purposes for which disclosure may be made are compliance with financial accounting or regulatory reporting requirements. It also allows for anonymous disclosure in the attempt to sell the tax return preparation business.

In 2009, there is some temporary guidance that eases some of the restrictions. It still prohibits disclosing information related to refund, credit, or rebate amounts, or a part thereof, for purposes of advertising or marketing.

How does Jackson Hewitt's pitch fit within the guidelines? My guess is the company will be forced to stop airing the ads, but no other sanctions will be imposed.

The only thing I am sure of is this: 9 out of 10 Jackson Hewitt customers are so bad at math they give the government an interest free loan!

If 9 Out Of 10 Jackson Hewitt Customers Receive a Refund, Do 9 out of 10 Jackson Hewitt Preparers Receive an Indictment?

Magic Johnson has been peddling the services of Jackson Hewitt this season. The ads claim 9 out of 10 customers receive a refund. The ad doesn't mention the Department of Justice's investigation into tax fraud of any of its franchise operators.