Liberty Tax to pay $750K over 'cash in a flash' promises

Liberty Tax, the third largest tax prep chain in the country, has agreed to pay $550,000 to over 7,300 residents of the District of Columbia who were allegedly misled and overcharged for tax preparation services, plus an additional $200,000 to the District, while promising to end marketing and pricing tactics that officials called a tax scam.

To entice customers, Liberty Tax promoted immediate handouts of $50 "just for filing with Liberty Tax." The company advertised it as "cash in a flash" and depicted it as a "perk" with no downside. 

In 2022, the D.C. Attorney General's office sued Liberty Tax, alleging the company illegally overcharged thousands of local residents and misled consumers with false advertising about its cash incentives. In the lawsuit, the AG's office detailed how the company claimed the $50 "cash in a flash" payments came with "no catch," but in reality, Liberty Tax actually increased its prices for customers who accepted the money. On average (depending on which forms were filed), customers who accepted the upfront $50 in cash were then charged up to $200 more for tax prep than customers who did not accept cash.

Luke Sharrett/Bloomberg

Under the settlement agreement, Liberty Tax agreed to pay $5500,000 to compensate more than 7,300 DC residents who participated in the "cash in a flash" promotion and were secretly overcharged for tax prep from 2014 to 2021. Taxpayers will receive compensation depending on how many times they participated in the promotion. Eligible consumers will receive notifications from Liberty Tax through both email and U.S. mail in the months ahead.

Liberty also agreed to permanently end the "cash in a flash" program across the country and is banned from creating any new incentive programs that affect the prices it charges for tax prep for those who receive the incentive.

Liberty Tax will also need to report to the D.C. Attorney General's office on any incentive programs it offers to attract consumers, as well as submit all of its marketing and training materials. The company will also need to provide extensive data that will enable officials to determine whether any incentive programs are affecting prices for those consumers who receive the incentive. Liberty will also pay $200,000 to the district.

"Liberty Tax deceived thousands of taxpayers in D,C, with its bogus 'cash in a flash' promotion," said D.C. Attorney General Brian Schwalb in a statement Wednesday. "This settlement not only forces Liberty Tax to compensate every Washingtonian it unlawfully took advantage of, but also creates strong, nationwide legal guardrails that will protect taxpayers across the country. Our office will continue to use the law to hold accountable any business that seeks to unfairly profit by deceiving D.C. residents."