Attorney General Schwalb Announces Liberty Tax Will Pay $750,000 For Deceiving Thousands of District Residents in "Cash in a Flash" Tax-Prep Scam

Settlement Will Compensate DC Residents Who Were Misled; Company Must Change Practices Nationally

WASHINGTON, DC – Attorney General Brian L. Schwalb today announced that the nation’s third largest tax preparation company, Liberty Tax, will pay $550,000 to more than 7,300 DC residents who were misled and overcharged for tax preparation services. As part of a settlement resolving the consumer protection lawsuit that the Office of the Attorney General (OAG) filed against it, Liberty Tax must also pay $200,000 to the District and permanently end the deceptive marketing and pricing tactics it used across the US.  

“Liberty Tax deceived thousands of taxpayers in DC with its bogus ‘cash in a flash’ promotion,” said Attorney General Schwalb. “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 DC residents.”

“Annual tax refunds are an incredibly important source of income for thousands of families in the District and millions across the country,” said John Breyault, National Consumer League Vice President of Public Policy, Telecommunications, and Fraud. “Deceptive tax preparation offers rob those families of money they need to pay rent, put food on the table, and pay childcare expenses. The National Consumers League applauds General Schwalb for holding Liberty Tax accountable. This settlement should serve as a warning to any tax preparation company that seeks profits by deceiving consumers in the District of Columbia and beyond.”

“We applaud the Office of the Attorney General for its work protecting District residents from these deceptive practices and returning money to the taxpayers who need it the most,” said Jennifer Joseph, Supervising Attorney in Legal Aid DC's Consumer Law Unit. “Tax credits are an important part of our safety net, with refunds providing a critical influx of cash for low-income taxpayers who rely on them to catch up on bills and other expenses after struggling to make ends meet throughout the year. The settlement also underscores the ongoing need to simplify tax filing processes at the federal and District level and the importance of free tax preparation services offered at VITA sites throughout the District, which can save consumers hundreds of dollars each year.”

“We are proud to partner with and refer clients to the Office of Attorney General because they protect all DC residents from dubious consumer practices,” said Jorge Tormes, senior staff attorney at Tzedek DC, a legal services nonprofit focused on consumer issues. “The investigation and legal action by Attorney General Schwalb’s office against Liberty Tax is vitally important work and protects DC residents, especially working class residents of color, from deceitful practices designed to extract wealth from the Ward 7 community.”

Liberty Tax is the third largest tax preparation company in the United States. It currently has two brick-and-mortar locations in the District—both in Ward 7—and provides services to thousands of DC taxpayers each year. To attract consumers, Liberty Tax aggressively promoted immediate handouts of $50 “just for filing with Liberty Tax.” Liberty Tax called this “cash in a flash” and portrayed it as a “perk” with no downside.

In 2022, OAG sued Liberty Tax, alleging that the company illegally overcharged thousands of DC residents and misled consumers with false advertising about its cash incentives. In the lawsuit, OAG detailed how the company explicitly stated that 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 cash. On average (depending on what 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.

To resolve OAG’s lawsuit, Liberty Tax must:

  • Pay $550,000 to DC residents who were overcharged: Liberty Tax must 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. Consumers will receive compensation depending on how many times they participated in the “cash in a flash” promotion. Eligible consumers will receive notifications from Liberty Tax via both email and US mail in the coming months.
  • Permanently stop using deceptive cash incentives: Liberty Tax must permanently end the deceptive “cash in a flash” program across the US and is banned from creating new incentive programs that impact the prices the company charges for tax prep for those consumers who receive the incentive.
  • Submit to monitoring for five years: Liberty Tax must report to OAG on any incentive programs implemented to attract consumers, including submitting all of their marketing and training materials. The company must also provide OAG with extensive data that will enable OAG to determine whether any incentive programs are affecting prices for those consumers who receive the incentive. 
  • Pay $200,000 to the District.

A copy of the settlement agreement is available here.  

This matter was handled by Wendy Weinberg, Senior Assistant Attorney General, Nicole Hill, Assistant Attorney General, and Adam Teitelbaum, Director of the Office of Consumer Protection.

Free Tax Assistance for DC Residents

Many DC residents are eligible for free tax preparation services, including people with lower incomes, seniors, people with disabilities, people who need language support, and members of the military, veterans, or their family members.

Each year during tax season, between February and April, community-based organizations working under the IRS Volunteer Income Tax Assistance (VITA) program offer free tax preparation services to District residents at multiple locations across DC, including libraries and recreation centers. More information about the VITA program is available here. The list of locations where this free service will be offered in 2024 will be updated in the coming months. Seniors also can receive free tax preparation services through AARP’s Tax-Aide program, which also will be updating its list of 2024 locations.

How to Report Unfair Business Practices
OAG protects DC residents from fraud, exploitation, and deceptive business practices by investigating and mediating consumer complaints, educating residents about their rights, and taking legal action against businesses and individuals that harm residents and break the law. Since January 2023, OAG has obtained nearly $50 million through enforcement actions and settlements on behalf of DC consumers. 

To report scams, fraud, or unfair business practices, contact OAG’s Consumer Protection Division: