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Why the Earned Income Tax Credit is Essential to the Opportunity Economy

By Rebecca Thompson on 01/27/2017 @ 11:00 AM

Tags: EITC, Federal Policy, Local Policy, Taxpayer Opportunity Network

Click the image to check out our EITC Awareness Day Toolkit!

Since 1975, the Earned Income Tax Credit (EITC) has been among the most powerful anti-poverty tools in our country. Because the EITC is a fully refundable tax credit that puts money back into the hands of hard-working taxpayers, it often represents the largest windfall of cash that low- and moderate-income households receive in a given year. As such, the EITC is a critical income support that helps hard-working Americans overcome financial challenges and put a little away for a rainy day, all while fulfilling their civic obligation to pay their taxes.

In recognition of this powerful tool, the IRS has declared today EITC Awareness Day. Now an annual event, EITC Awareness Day is dedicated to raising awareness of, protecting and expanding the EITC. Throughout the month, CFED and the Taxpayer Opportunity Network have been working with our partners in the field to take advantage of this important opportunity, as protecting and expanding the EITC is critical to our mission of expanding economic opportunity.

As we celebrate EITC Awareness Day today, it is also critical that we recognize the important role that Volunteer Income Tax Assistance (VITA) programs play in connecting taxpayers with the EITC. VITA programs provide free, high-quality tax preparation services to low-income workers, and these services not only connect families with the EITC, but also to a range of other financial capability and asset-building services in their community. As such, EITC Awareness Day is a prime opportunity for CFED and the Taxpayer Opportunity Network to say “thank you” to the thousands of VITA volunteers across the country who make the important work of community tax preparation possible.

EITC Awareness Day affords us the opportunity to carry the message of the value and effectiveness of the EITC far and wide, encouraging all who may be eligible to seek out and claim the credit, and to lift up our collective voice with our elected officials at the local, state and federal levels to protect and expand the EITC to help as many taxpayers as possible.

Interested in using your voice to protect and expand one of the most powerful anti-poverty programs in the US? Download our EITC Awareness Day Toolkit for more information, resources, templates and tips for how you can make a difference!

Help Expand and Protect the EITC!

By Justin Chu on 01/19/2017 @ 08:00 AM

Tags: Taxpayer Opportunity Network, EITC

With the start of tax season, it’s time for us all to spread the word about the Earned Income Tax Credit (EITC) and all of the benefits it provides for our economy. National EITC Awareness Day is on January 27. If you’re looking for ideas to spread the word, the Taxpayer Opportunity Network and CFED have crafted easy ways to spread the word about and advocate for the EITC that you can do in 5, 10 and 30 minutes

Got 5 Minutes? Reach Out to Your Elected Officials

By working together to sound a consistent message, we have the unique opportunity to reach our Senators and Representatives with messages about the importance of the EITC for our communities. If you have five minutes to spare, use this template to send an email or call your member of Congress.

Got 10 Minutes? Invite Your Lawmakers to a VITA Site

VITA sites are key to connecting more taxpayers to the EITC, and inviting your lawmarkers to a VITA site can show the power of community tax preparation in action. If you have 10 minutes to spare, reach out to your mayor, county councilmembers, state legislators or members of Congress using this draft script to invite them to join you at your VITA site.

Got 30 Minutes? Share an EITC Success Story

Telling the story of a taxpayer in your community who set out on the path to financial well-being thanks to EITC can be a key step in personifying the power of the program. You can put a face to EITC and its role in the community by sharing your story with us in our Story Bank. The stories we share are for the entire community tax prep field to use to help lawmakers see the importance of protecting and expanding EITC.

Eager to Do More? Download Our EITC Day Toolkit!

This easy-to-use toolkit contains each of the tools mentioned above, as well as a variety of other tools, including:

  • Sample social media posts (in both English and Spanish) and shareable graphics you can use to spread the word among your networks.
  • State-by-state data snapshots that explain the impact of EITC in your state.
  • A social media toolkit, developed in partnership with Intuit Financial Freedom Foundation and the Glen Echo Group, for messaging refund delays during the upcoming tax season. (As a reminder, all payments of the EITC will be delayed until at least February 15.)

We understand the start of the tax season is an incredibly busy time for all those involved in tax preparation, but by taking a few moments to show the importance of the EITC in the community, you are creating steps to protect its future. For all you do to be a good advocate for your community and neighbors, thank you!

One Easy Step to Improve Tax Return Accuracy and Protect Consumers This Tax Season

By Chad Bolt on 01/10/2017 @ 01:00 PM

Tags: Federal Policy, Taxpayer Opportunity Network, Economic Inclusion, EITC

In Washington, DC, all eyes are focused on a date less than two weeks away: January 20, Inauguration Day. Outside the beltway, another date this month looms large for hardworking taxpayers and tax prep volunteers across the country: January 23, the official kick off of tax season!

The new administration and the new Congress have an opportunity to improve tax return accuracy, reduce overpayments and protect tax filers during tax season by setting minimum competency standards for paid tax preparers. Currently, 46 states do not require paid preparers to meet any minimum level of training or expertise to charge filers to file a return on their behalf. Chances are, your hairdresser has undergone more training and certification than your paid tax preparer.

The lack of minimum standards has serious implications. A recent National Consumer Law Center and Consumer Federation of America review of mystery shopper testing studies found problems in as many as 90% of returns filed by paid preparers! In 2013, South Carolina had to permanently ban a tax services provider due to fraudulent claims that federal authorities estimate cost the federal government $55 million. Maryland established its own minimum standards at the state level after it stopped accepting tax returns from four groups of private tax preparers due to a high volume of suspicious returns and repeated compliance violations. Minimum standards would save the government money and protect consumers from predatory preparers that lack basic competencies.

Fortunately, we already have a model for implementing effective minimum competency standards: the Volunteer Income Tax Assistance (VITA) program. VITA must meet strict federal standards to ensure returns are accurately and efficiently prepared. Unlike paid tax preparers, local VITA programs are held to a national standard for tax preparer training, site administration and quality of tax preparation. Local VITA programs train and prepare volunteers, who must become certified according to strict IRS standards. To prevent identity theft issues, valid federal or state identification is required of all filers.

How have these standards affected VITA’s results? VITA’s level of accuracy has been steadily increasing over the years, from 85% in 2009 to 94% in 2015, despite increased demand for VITA services and stagnant funding. The 94% accuracy rate is one of the highest of any category of tax preparation services, including CPAs and major tax preparation services companies, and proves that minimum competency standards can have a marked impact on the quality of tax preparation.

Congress can improve tax return accuracy, particularly returns that involve the Earned Income Tax Credit (EITC), by establishing minimum competency standards. This is an easy but effective way to reduce overpayments without making the EITC more complex to claim or less beneficial to workers that claim it. The Joint Committee on Taxation has scored proposals to establish minimum competency standards as generating $135 million over ten years – in part because unenrolled paid preparers are more likely than any other type of preparer to file inaccurate returns. Even big tax preparation software providers and large tax preparation chains support this proposal.

Tax reform is sure to be a top priority in the 115th Congress. Any discussion of reforming the tax code should include this easy and commonsense measure that improves the accuracy of tax returns, reduces overpayments and protects tax filers.

You can help by calling your member of Congress and letting them know you support minimum competency standards for paid preparers. Or, if you are a member of the tax preparation community and have a story to share about someone you know who fell victim to an unscrupulous preparer, email CFED’s Federal Policy team so we can make sure members of Congress know how the lack of minimum competency standards affects their constituents.

What Can Mayors Do To Promote VITA?

By Kamolika Das and Holden Weisman on 07/27/2016 @ 10:00 AM

Tags: EITC, Financial Capability, Local Policy

For many middle- and high-income American families, tax refunds are a welcome infusion of cash that augments their regular paychecks—cash that can be put towards a vacation or shopping spree. But for others, especially those making less than the median household income, tax refunds make up a substantial share of their annual resources. Working families often rely on tax refunds to stay afloat and purchase basic household necessities. Accessing free and trustworthy tax preparation services is key for ensuring that families maximize the refund amounts that they rely on and deserve. The Volunteer Income Tax Assistance (VITA) program fills this gap by offering free income tax return preparation to low-wage earners, persons with disabilities, the elderly and limited-English-speaking taxpayers. Demand for the program has surged since 2003, but despite its popularity, millions of people eligible for VITA services are not benefiting from the program.

Mayoral Role in Promoting VITA

Fortunately, mayors and local civic leaders have the ability to help expand VITA services and ensure the program’s success in building financial security for residents. To begin with, mayors and local leaders need to recognize the fact that tax preparation support is necessary throughout the year, not just during tax season. Organizations that provide year-round services are better able to integrate other strategies into their work that contribute to financial capability, such as financial coaching and retirement planning. To enhance tax assistance services for low-income residents, advocates should urge their mayors and civic leaders to take realistic, effective actions throughout the year. Our VITA one-pager highlights some potential actions, such as greater VITA and EITC outreach and developing direct ties with local VITA sites.

Model Cities: Louisville & San Antonio

These recommended actions are both practical and achievable. San Antonio successfully established VITA sites as a hub for financial capability services that often have in-house counselors. The 21 sites are located throughout the city at college campuses, delegate agency sites and libraries. At the 16 library sites, San Antonio’s Department of Human Services worked with library leadership to establish LEARN, an adult education center that provides job search assistance, financial empowerment education and one-on-one counseling. Not only does the City of San Antonio contribute to the sites financially, but the City Council also promotes the programs through public events such as the annual EITC Awareness Day and by sponsoring one of two VITA mobile teams with the local United Way.

Louisville has also been a top-performing city in terms of VITA outreach and the availability of VITA sites. Mayor Greg Fischer has championed the program since taking office, has prioritized VITA funding for those sites that can demonstrate that VITA is integrated into a suite of additional financial capability services. The mayor also hosts local VITA and EITC awareness events during tax season. Former Louisville Mayor Jerry Abramson and a team of community leaders initially established the Louisville Asset Building Coalition (LABC), a collaborative of over sixty organizations, to administer the VITA program and connect clients to other financial resources. The program has grown enormously in the last fifteen years—from filing 635 returns in its first year to 10,000 returns in the 2015 tax season.

Outcomes & Recommendations

These cities’ efforts have been worthwhile. In the 2014 tax season, Louisville’s 27 VITA sites returned $82 million to the community. San Antonio has also made strides in the past year, filing approximately 36,500 tax returns in the last tax season—about 3,000 more than the year prior. San Antonio also established 1,290 mobile teams (an increase of 84 teams from last year), and attracted 6,990 first-time users.

Both cities attribute a large part of their success to the collaborative efforts and partnerships they have established throughout their respective communities. In San Antonio, the Department of Human Services has collaborated closely with IRS, United Way, financial partners in the coalition and volunteers. Partners at LABC relayed that mayors can play a critical role in helping organizations access federal dollars for continued support of VITA and EITC outreach.

VITA has been critical for improving the uptake of EITC and other tax credits. The program has helped low-income taxpayers maximize their tax refunds, avoid unnecessary fees, increase financial stability and improve the accuracy rate of their tax filings. As former Louisville Mayor Jerry Abramson reminded the public, “This is not charity. This is your money. It belongs to you.” It is our hope that more mayors and local leaders throughout the nation will follow San Antonio and Louisville’s lead and do their part to support low-income workers and their communities, and we look forward to supporting cities in these efforts.

White Paper Highlights Promising Ideas for Strengthening the VITA Program

By Shervan Sebastian on 07/07/2016 @ 09:00 AM

Tags: Data and Research, EITC, News, Taxpayer Opportunity Network

From the very first day that CFED launched the Taxpayer Opportunity Network in 2015, we have worked to strengthen the national network of Volunteer Income Tax Assistance (VITA) sites. Thanks to the support of the W.K. Kellogg Foundation, Intuit Financial Freedom Foundation, JPMorgan Chase & Co., Annie E. Casey Foundation, Citi Foundation and Bank of America Charitable Foundation, the Taxpayer Opportunity Network has conducted innovative research and engaged leaders and practitioners in the community tax preparation field to advance this goal. Last month, we unveiled the latest resource we’ve designed to support this field: Strengthening VITA to Boost Financial Security at Tax Time & Beyond.

Strengthening VITA to Boost Financial Security at Tax Time & Beyond is a white paper CFED developed in partnership with leaders and advocates from the community tax preparation field. It was created in close consultation with members of the Taxpayer Opportunity Network and the Assets & Opportunity Network, and as a result it offers policy recommendations and suggestions for strengthening programs based on insights from leaders on the ground.

Examples of our recommendations include:

  • Congressional authorization so the VITA program is not reliant on an annual funding process, which would protect the program against budget cuts and ensure that it has stable funding longer-term.
  • Increase in funding to keep up with the growing demand for VITA services, which jumped 220% between 2004 and 2012.
  • Establishment of a VITA Innovation Fund to identify, test and scale best practices, including new services to put more money in the pockets of low-income workers.
  • Creation of a federal student loan assistance program to attract new volunteer tax preparers by providing them with a stipend for paying back their student loans.

Our white paper calls for Congress and the Administration to take action to strengthen the community tax preparation field. Practically speaking, this means creating basic competency standards for paid preparers, increasing VITA’s scale, improving VITA’s effectiveness and investing in innovations guided by best practices and local expertise. These reforms will help to ensure that VITA remains a vibrant community effort with large-scale impact on the lives of millions of low- and moderate-income taxpayers for the next 45 years and beyond.

To access additional community tax preparation resources, join the Taxpayer Opportunity Network.

W.K. Kellogg Foundation Joins with CFED to Strengthen 800 Volunteer Income Tax Assistance Sites Nationwide

By Sean Luechtefeld on 04/18/2016 @ 11:00 AM

Tags: Taxpayer Opportunity Network, EITC, News

W.K. Kellogg Foundation Joins with CFED to Strengthen 800 Volunteer Income Tax Assistance Sites Nationwide

New Partnership to Ensure All Eligible Taxpayers Receive Their Earned Income Tax Credit

For Immediate Release

April 18, 2016

Contact: Sean Luechtefeld, 202.207.0143

Washington, D.C. — The Corporation for Enterprise Development (CFED) and the W.K. Kellogg Foundation announced a $750,000, three-year initiative to support over 800 Volunteer Income Tax Assistance (VITA) programs nationwide, including an effort to uncover key barriers that prevent low- and moderate-income taxpayers from receiving the Earned Income Tax Credit (EITC) and other tax credits recently made permanent. VITA sites help struggling families and individuals across the country secure important tax benefits such as the EITC, reduce debt and meet their civic obligations as taxpayers, setting them on the path to financial security and opportunity.

In 2014, CFED launched the Taxpayer Opportunity Network to support VITA sites across the country. Today marks the end of the Network’s second tax season. During its first two tax seasons, the Network has provided critical training, quality assurance and advocacy resources to hundreds of VITA programs across the country. For example, Network staff coached VITA programs through changes that resulted from the adoption of the Affordable Care Act. The Network’s stakeholder education efforts also helped inform a 25% increase ($3 million) in funding for VITA in 2016, the first increase in funding since 2008. This victory will ensure that hundreds of thousands of additional American families will now have the opportunity to receive expert, free tax assistance, connecting them with an opportunity to increase savings and move one step closer to economic stability.

“We are thrilled to continue our long-standing partnership with the W.K. Kellogg Foundation through the Taxpayer Opportunity Network,” said CFED President Andrea Levere. “Thanks to supporters like the Foundation, CFED can provide resources and be a voice for the community tax preparation field for years to come.”

“We believe that when children are raised in financially secure homes, they have more opportunities to succeed in life. Accessing resources like VITA and EITC is vital to building economic stability for families and local communities,” Loren Harris, director of Family Economic Security at the W.K. Kellogg Foundation, added. “We’re looking forward to working with CFED to enhance the impact of these programs and ensure that they reach working families who need them most.”

For more information or to join CFED's Taxpayer Opportunity Network, click here.

# # #

CFED's work makes it possible for millions of people to achieve financial security and contribute to an opportunity economy. We scale innovative practical solutions that empower low- and moderate-income people to build wealth. We drive responsive policy change at all levels of government. We support the efforts of community leaders across the country to advance economic opportunity for all. Established in 1979 as the Corporation for Enterprise Development, CFED works nationally and internationally through its offices in Washington, DC; Durham, North Carolina, and San Francisco, California.

The W.K. Kellogg Foundation, founded in 1930 as an independent, private foundation by breakfast cereal pioneer Will Keith Kellogg, is among the largest philanthropic foundations in the United States. Guided by the belief that all children should have an equal opportunity to thrive, WKKF works with communities to create conditions for vulnerable children so they can realize their full potential in school, work and life.

The Kellogg Foundation is based in Battle Creek, Michigan, and works through the U.S. and internationally, as well as with sovereign tribes. Special emphasis is paid to priority places where there are high concentrations of poverty and where children face significant barriers to success. WKKF priority places in the U.S. are in Michigan, Mississippi, New Mexico and New Orleans; and internationally are in Mexico and Haiti. For more information, visit www.wkkf.org

New Bipartisan Bill Boosts Financial Security at Tax Time

By Ezra Levin on 04/13/2016 @ 04:00 PM

Tags: Federal Policy, EITC, Individual Development Accounts, Innovation, Financial Capability, Matched Savings, News

Millions of Americans are poised to get a big opportunity to move their financial lives forward if Congress acts on a bold new policy proposal. We are excited to share the news that Senators Cory Booker (D-NJ) and Jerry Moran (R-KS) have introduced the Refund to Rainy Day Savings Act today!

This bipartisan bill, built on years of research and lessons from the asset-building field, will empower Americans to use the tax-time moment to save for emergencies and foster innovation within the Assets for Independence (AFI) program, the nation’s largest asset-building initiative. Specifically, the bill will:

  • Allow tax filers to set aside a portion of their refund as emergency savings for later in the year. Tax filers receiving a direct deposit tax refund may defer 20% of their refund by opting into the Rainy Day Savings Program on their 1040 tax form. This savings will accumulate interest before being transferred to the tax filer’s account six months after deferral. Tax filers may also opt to withdrawal their funds early, any time after thirty days from filing.
  • Establish a pilot program to evaluate savings matches for lower-income tax filers. This pilot will explore the impact of using matching funds to incentivize the establishment of emergency savings at tax time through the deferral. In this pilot, lower-income tax filers will be able to receive a match ion their 20% deferral at the end of the six-month period. Community organizations, such as those operating VITA sites, will apply for grants to administer this match to their participants and help them build savings and financial capability skills.
  • Amend the Assets for Independence grant program. The bill will greatly expand the flexibility of the program by:

- Establishing “Innovation Development Accounts” that expand allowable matched savings purposes beyond homeownership, small business and education, the only three currently eligible asset purchase.

- Increasing the maximum participant match to $5,000.

- Expanding and simplifying the eligibility requirements for participation.

- Simplifying many program requirements to decrease the burden on both grantees and the AFI program.

The introduction of this bill is a huge step forward for financially vulnerable Americans. Its passage would create a new tool — the Rainy Day Savings Program — to help low-income tax filers save for the inevitable financial emergencies that can occur at any time. With this new savings tool, participants will be less likely to need to reach for a credit card or payday loan when a surprise medical bill or car repair busts the monthly budget. Additionally, the amendments to the AFI program reflect the lessons learned from two decades of Individual Development Account (IDA) implementation and the understanding that practitioners and participants need greater flexibility to maximize the wealth creation potential of the program. Both of these features, with the help of practitioners, will allow Americans to move towards financial security. We urge Congress to take swift action on this legislation to give Americans the opportunity to build a more financially secure future for themselves and their families.

CFED is proud to have worked closely with Senators Booker and Moran on this legislation. This was a very collaborative effort, and we were very pleased to see a large group of leaders weigh in with their own expertise and endorse the final bill. This group includes:

  • Aspen Institute Financial Security Program
  • Asset Building Program, New America
  • Center on Budget and Policy Priorities
  • Center for Global Policy Solutions
  • First Focus Campaign for Children
  • The Housing and Community Development Network of NJ
  • New Jersey Policy Perspective
  • PolicyLink
  • Young Invincibles

How Experts Use Tax Time to Move Low-Wage Filers toward Financial Security for the Rest of the Year

By Fran Rosebush on 02/24/2016 @ 11:00 AM

Tags: Taxpayer Opportunity Network, EITC

Over 3 million low-income taxpayers access free, quality tax preparation at Volunteer Income Tax Assistance (VITA) programs each year in their communities to work through complicated tax questions, access the Earned Income Tax Credit (EITC), file prior year returns and more. When you walk into a VITA site you can see numbers of people having intimate one-on-one conversations about their income, finances and personal lives with a local, trained volunteer. It’s a moment where they are reflecting on their financial situation and opening up their lives with someone else. So how are VITA sites leveraging this moment to help low-wage workers move toward greater financial security? The answer is: lots of ways!

Last summer, the Taxpayer Opportunity Network convened more than 20 VITA practitioners, researchers and government agencies to talk about how groups are leveraging VITA, which products and services they’re offering or piloting and what types of successes and challenges are they having. We learned so much from this group of experts that we’re continuing to convene them as a working group.

From this group we learned that there is a broad spectrum of financial capability services being offered at VITA sites, including: access to checking accounts and prepaid cards for direct deposit, incentivized savings programs, credit counseling and credit repair, ChexSystems report screening, public benefits enrollment, financial literacy workshops, FAFSA assistance, ITIN applications and more.

As expected, we also learned that there are many different types of products being offered at tax sites for low-wage taxpayers to access, such as: savings bonds, savings accounts, checking accounts, prepaid debit cards, low- or no-cost refund anticipation loans, children savings accounts, credit building loans and now myRA retirement accounts and more.

This group has learned a lot over the years. We now know that some taxpayers are more likely to save for their children than themselves and that people are more likely to engage in the savings program if it’s easy and fun. We have also learned that VITA programs often need additional hands to implement financial capability programs because tax site volunteers and staff have enough on their plates with ensuring returns are completed accurately.

Based on what they learn, the VITA practitioners in this group are continuously updating their programs each year. For example, Boston Tax Help Coalition has developed a financial check-up process for each of their taxpayers. Baltimore CASH Campaign has figured out how to make savings fun with help from D2D Fund, and Prepare + Prosper has tapped into the motivations of their taxpayers to offer them the service that is most relevant to their goals. United Way of San Antonio & Bexar County has also been testing incentivized savings programs and monitoring take-up and savings rates in conjunction with MDRC.

These groups are also taking note of where their specific taxpayers are financially to make sure they’re offering services and products that meet their specific needs. For example, some sites are offering ChexSystems report screening and credit building loans at tax sites due to an identified need.

There is so much this group of expert practitioners is learning about this work, but there are many questions we still need to tackle. How much should programs incentivize savings and under what terms? Should financial coaching be offered at tax time or at a future date? Should groups incorporate an automatic annual credit pull at the time of filing taxes?

A lot of research out there compliments what these VITA leaders are testing. If you’re interested in learning more, check out resources like MDRC’s SaveUSA study on tax time savings, Washington University’s Center for Social Development’s tax time savings toolkit, Dr. Kathy Edin’s research in It’s Not Like I’m Poor, CFPB’s tax time savings blog and the Taxpayer Opportunity Network’s Resource Library.

If you’re working on tax time financial capability programs and services and want to contribute to this conversation, let us know at taxpayeropportunity@cfed.org. We plan to continue to share what we’re learning through this group over time, so stay tuned. And if you’d like to get timely updates on community tax preparation and connect with other Taxpayer Opportunity Network members, sign up here!

The Quality Pledge

By Barbara DelBene, Guest Contributor on 02/19/2016 @ 04:00 PM

Tags: Taxpayer Opportunity Network, EITC

Several years ago, the Quality Assurance Working Group (QAWG) developed a quality pledge: seven ways VITA staff can commit to the preparation of correct and complete tax returns every time. The QAWG is a collection of experienced VITA practitioners who are affiliated with the Taxpayer Opportunity Network and formerly were a working group of the National Community Tax Coalition. They work to improve the quality of VITA tax returns nationwide.

The ideas in the quality pledge are not new and many echo the IRS Quality Site Requirements. As we dive headfirst into the 2016 filing season, these tenets are certainly worth a review. Let’s dig in and explore how they work.

1. Use an intake and interview process for all tax returns prepared.

A tax site needs to find out a lot of information about a taxpayer in order to prepare a correct and complete tax return. That means talking to the taxpayer — not just during preparation, but during the intake process as well. A thorough, effective intake interview determines if the taxpayer has all the information needed to do the return, whether all the issues on the return are within the expertise level of the site staff and if the amount of the taxpayer’s income meets local guidelines. A great intake interview also establishes an effective rapport with the taxpayer and builds the taxpayer’s trust in the VITA site.

How it works: When doing intake, don’t just glance at the intake documents and send the taxpayer to the waiting area. Carefully look things over. Ask questions. Discuss the taxpayer’s answers. Review all the documents. As a preparer, don’t just start making TaxWise entries as soon as the taxpayer sits down. Look over the intake information and make sure that you understand everything presented. Make eye contact with the taxpayer and really listen. That’s how you get the information you need and that’s how you provide good customer service.

2. Ensure that only trained and certified volunteers answer tax questions and prepare tax returns.

Taxes are complicated, right? What may seem on the surface to be a straightforward, easy question that could be handled by an untrained greeter could easily turn into a more complex tax issue. An untrained volunteer could easily mislead a taxpayer.

How it works: Site staff without, at a minimum, basic tax certification must understand that they can never answer questions related to the tax return. No exceptions for experienced greeters and the like. That person can answer when a client asks, “Where’s the washroom?” That person cannot answer when a client asks, “I only have an SSA-1099. Do I have to file?” Well, probably not. But a trained volunteer will know to ask additional questions. Was there withholding? Did the taxpayer sell any investments? Did the taxpayer do some work on the side for cash? A seemingly innocuous question can quickly turn into a complicated tax discussion.

3. Prepare only tax returns within the scope of our volunteers’ training and ability.

It’s not just about what issues are within scope for VITA. It’s about the knowledge and experience level of the preparers and reviewers at the site at that time. Entering something into TaxWise and clearing out all the red doesn’t necessarily mean it is correct. Understand what you are doing.

How it works: If something looks unfamiliar and no one on staff really understands it, don’t do that return. For example, if the site staff never sees income that goes on a Schedule D, turning away a taxpayer who arrives with several Form 1099-Bs may be the best course of action. The trick is to recognize limitations and identify such issues early in the process — ideally before the taxpayer spends a couple of hours in the waiting area.

4. Always prepare tax returns based on the facts presented and by correctly applying tax law using appropriate reference materials.

This isn’t just doing the data entry correctly and reporting all that cash income. It means asking all the relevant questions and heeding the answers. It means doing the right thing and never yielding to temptation to “help” a taxpayer by bending the rules a bit. It means never guessing.

How it works: When a taxpayer presents contradictory information, mumbles that he doesn’t want to talk about it, tells you something that just doesn’t make sense or you find that the conversation makes the hair on the back of your neck stand up, get the site coordinator involved. If things can’t be clearly explained and treated on the up-and-up, the site must refuse to prepare the tax return.

5. Educate taxpayers on their tax responsibilities and recordkeeping requirements.

Tax preparers are in a good position to provide some basic tax counseling. A volunteer who just finished a 2015 return probably has some good insight into what’s happening with 2016.

How it works: Tax counseling may sound pretty highfalutin, but it is often just basic advice that can happen in a million little ways. For example, if a retired person with no filing requirement is filing just to get a refund of income tax withheld, suggest that he file a W-4P to stop withholding. Then down the road he might not have to file. Spend some time with a self-employed taxpayer to discuss ways to keep track of business mileage. Make sure that someone with a big balance due understands how to avoid owing for subsequent years. Also, make sure that folks who owe understand the importance of filing on time, even if the tax cannot be paid in full. A single mom with a 16-year old son could use a heads-up that she won’t qualify for the child tax credit next year, which could make a big difference in her refund. A family with no health insurance might benefit from a referral to a local health insurance navigator.

6. Ensure thorough review of all returns and that the taxpayer and preparer are involved in the review process.

The taxpayer needs to be part of the review in order to answer the reviewer’s questions. The preparer needs to be part of the review in order to learn and to get a sense of closure.

How it works: Preparers learn from their mistakes and they learn from observing reviewer conversations with the taxpayer. Taxpayers benefit, too. Observing the review process can help taxpayers trust the tax return outcome.

7. Protect taxpayer information and maintain confidentiality.

When a taxpayer provides the information needed to prepare a tax return (social security cards, W-2s, bank account numbers and all the rest), they are basically giving us an identity theft treasure chest. We are the guardians and must ensure that it is safe. This goes beyond the obvious tax documents you’ll be handling. The conversations during tax preparation may cover other information that a taxpayer wants to keep private.

How it works: Shred any paperwork that is no longer needed. Be mindful of who can see information on the TaxWise computer screens. Guard passwords. Keep your voice down, particularly when discussing sensitive issues; for example, who is the father of which kid, the amount of co-payments made for hemorrhoid surgery or all the big gambling losses that reveal quite a habit. Share this information only as needed to prepare a correct return.

Take the Pledge

Any tax site that is abiding by these seven guidelines is on the road to success: high quality tax returns and marvelous customer service. So, are you ready? Raise your right hand and repeat after me….

Want even more information and resources to help connect working families with free tax prep? Join the Taxpayer Opportunity Network!

We Just Passed the Second Biggest Anti-Poverty Bill in 20 Years. Now What?

By Shervan Sebastian on 02/04/2016 @ 09:00 AM

Tags: Assets & Opportunity Initiative, Taxpayer Opportunity Network, Federal Policy, EITC

Did you know? Besides the Affordable Care Act, no single piece of legislation has done more to reduce poverty in the last 20 years than December’s tax deal to strengthen the Earned Income Tax Credit (EITC), Child Tax Credit (CTC) and American Opportunity Tax Credit (AOTC).

That was the report from Ellen Nissenbaum from the Center on Budget and Policy Priorities, at a Capitol Hill Policy forum last Friday marking the 10th annual EITC Awareness Day. And the dedication of the many advocates, staffers and lawmakers it took make December’s victories possible were on display as more than 150 people crowded in for the standing room-only event.

Co-hosted by CFED and Tax Credits for Working Families, the event featured keynote speeches from two of the most recognizable voices in the refundable tax credits community, who discussed just how important these tax credits are to low-wage workers. First, Professor Kathy Edin, author of It’s Not Like I’m Poor and $2 a Day. Dr. Edin spoke about her research and highlighted a new proposal to expand emergency savings for low-wage workers, the Rainy Day EITC. Sen. Cory Booker (D-NJ) then highlighted the impact of these tax credits in American communities and focused on the work being done in Congress to make further improvements to strengthen these credits, especially for workers without children. He also spoke about his work with Sen. Moran (R-KS) on upcoming legislation to boost emergency savings.

Following the keynote speakers, a panel of experts moderated by Dylan Matthews of Vox explored different perspectives on refundable tax credits. Dr. Edin was joined on the panel by: Theresa Pattara, Senior Director of Public Policy & Advocacy at H&R Block; Elaine Maag, Senior Research Associate at the Urban Institute; Laurie-Anne Sayles, a member of the Montgomery County Community Action Board; and David Newville, Director of Government Affairs at CFED.

These discussions drew attention to how refundable tax credits have served as such a critical tool for low-income families every year and why they have had the greatest impact on lifting low-wage Americans out of poverty. This event was a rare opportunity to celebrate genuine progress in the fight to make these credits more effective and provided the opportunity for members of the field to release new research and avenues for improvement.

December’s legislative achievement was the result of concerted efforts by dedicated members of Congress, the community tax field and the engagement and persistence of the Assets & Opportunity Network and the Taxpayer Opportunity Network, who consistently lobbied members of Congress to finally make these changes a reality. Just last November, members of these networks visited Capitol Hill and made a compelling argument on behalf of these very provisions, sharing personal and professional stories on the impact refundable tax credits have on low-wage workers nationwide.

2016 will be another critical a year for legislative progress. With the possibility of Rainy Day EITC legislation, 529/AOTC reforms and paid preparer regulations — not to mention expanding the EITC to those low-wage workers now excluded and making the VITA program permanent in statute — there will be numerous opportunities to strengthen refundable tax credits and expand financial security for low-wage families.

CFED remains committed to strengthening refundable tax credits by convening diverse voices in the field to solicit best ideas for charting a path forward. To stay informed of our future advocacy efforts join the Tax Opportunity Network and become a member of an active community working to make these credits stronger for families, individuals and children nationwide.

We Can Make America’s Greatest Anti-Poverty Tools Even Better

By Fran Rosebush, Cameron Parsons and Ezra Levin on 01/29/2016 @ 12:00 PM

Tags: Assets & Opportunity Initiative, Taxpayer Opportunity Network, EITC, Federal Policy, Local Policy

This week, as part of the first-ever Assets & Opportunity National Week of Action, we are joining with advocates nationwide to call attention to the issues of economic insecurity and inequality that too many families across this country face and highlight the successful solutions that create an opportunity economy in which everyone has the chance to get ahead. Today, we're focusing on connecting working families with tax credits that help them get ahead .

For millions of hard-working, low-income taxpayers, 2015 ended with a huge victory. As one of its final acts last year, Congress passed a law that made permanent key provisions of three tax credits aimed at low- and moderate-income workers: the Earned Income Tax Credit (EITC), Child Tax Credit (CTC) and American Opportunity Tax Credit (AOTC). These tax credits are some of the most powerful anti-poverty tools we have, and their recent expansions will impact nearly 16 million people in hard-working families to cover their basic expenses and begin to create a foundation of savings to build stronger financial security in their lives. The new law also increased funding for the Volunteer Income Tax Assistance (VITA) program by 25%, greatly expanding the capacity of community tax preparation sites to connect low-wage taxpayers with these important credits. These successes came as the result of years of successful advocacy by service providers and other stakeholders across the country. As we finish celebrating this victory for low-wage workers, now is the time ask, what’s next?

Today, on EITC Awareness Day, CFED and the Taxpayer Opportunity Network are working to ensure the dialogue doesn’t stop here. We’re partnering with key allies, supporting local communities, raising awareness about these critical anti-poverty tax programs and working together to ensure effective policy reforms that support low-income and working families as they build their financial security. This morning, we hosted an event with Tax Credits for Working Families on Capitol Hill to hear from key decision-makers about the future of tax credits for low-wage workers. The event—keynoted by Johns Hopkins University Distinguished Professor Kathryn Edin—brought together legislators, advocates, tax practitioners, scholars and taxpayers to share their knowledge and first-hand experience with refundable tax credits, while addressing what the recent tax deal means and what can be done to improve tax programs even more.

Many of our local partners and members of the Taxpayer Opportunity Network are also working to bring awareness of the EITC in their communities to ensure every eligible taxpayer is aware of the credit—and of the free, high-quality tax preparation services available at VITA sites. These partners are hosting press conferences and briefings at their state capitols, bringing key stakeholders to visit VITA sites and more. For example, Goodwill Industries of Greater Sacramento Valley & Northern Nevada hosts an annual event at an AARP tax preparation site to raise awareness about the EITC with local taxpayers. CA$H Maine sets up information tables with resources about EITC and VITA for legislators to peruse at the state capitol. And Prepare + Prosper in Minnesota is working with the financial empowerment department in one of their state’s most populous counties, Dakota County, to share resources about EITC and VITA with county employees.

Here are a few ways you can support further improvements to these tax credits:

Join the national EITC Awareness Day conversation today by raising awareness using #EITCAwarenessDay, #VITAWorks, #AOActionWeek and this social media toolkit. Stay tuned in the future for more information about how we can secure, expand and improve these essential tools to create an opportunity economy that works for all.

Want to expand access to tax credits that lift millions of working families out of poverty? Join the Taxpayer Opportunity Network!

After Years of Advocacy Work, VITA is Stronger Than Ever

By Shervan Sebastian, Emanuel Nieves and Cameron Parsons on 01/12/2016 @ 08:00 PM

Tags: EITC, Taxpayer Opportunity Network, Assets & Opportunity Initiative, Federal Policy

Since CFED launched the Taxpayer Opportunity Network a year ago—indeed, since the Assets & Opportunity Network launched in September 2012—one of our key goals has been to strengthen the nationwide network of Volunteer Income Tax Assistance (VITA) sites by increasing federal funding for the VITA program.

Today, we’re proud to announce that the VITA program will soon be getting stronger, as last month Congress approved an additional $3 million in funding, for a total of $15 million, in fiscal year 2016 for community tax programs nationwide—the first funding increase for the program since 2010!

For Rebecca Thompson, Volunteer & Tax Site Manager of Real$ense in Jacksonville, Florida and a member of the Taxpayer Opportunity Network, the news of this victory came as a major surprise.

“It’s a huge win,” Rebecca said. “Definitely more than I expected. It’s a big opportunity for us to grow and expand our service to the taxpayers.”

Given the inability of Congress over the years to take action on big legislation, the increase in VITA funding is a huge victory for low- and moderate-income families across the country.

But this victory didn’t just happen on its own. Rather, it was the direct result of sustained and tireless effort by members of the Taxpayer Opportunity Network, the Assets & Opportunity Network and others in the community tax field. Those efforts not only brought about this huge win, but they also resulted in Congress reaching a landmark agreement last month to make recent improvements to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) permanent.

As a result of the 25% funding increase, the VITA program will have a heightened impact on communities in need nationwide. The increase in funding will provide sites with the capacity to file an additional 500,000 high-quality tax returns, which will lead to $550 million in no-cost refunds returned to American communities. Hundreds of thousands of additional individuals and families will now be able to receive free expert tax assistance, get the opportunity to increase savings and move one step closer to economic stability. Moreover, these families will also have access to a permanently stronger Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

As we all know too well, getting Congress to act in this political environment is not easy, but these hard-fought wins prove that when advocates push and continue to apply pressure on Congress, anything is possible. This is exactly what Rebecca was doing this past November, when she along with other leaders of Taxpayer Opportunity Network and the A&O Network met with their federal legislators on Capitol Hill during the 2015 Leadership Convening, right as Congress was in the middle of their budget deal negotiations.

While on the Hill, Rebecca met with representatives from her home state of Florida—including staffers from the Offices of Sen. Marco Rubio, Sen. Bill Nelson and Rep. Corrine Brown—sharing her VITA experience and stories as a way to help each office understand the importance of the EITC, CTC and VITA program to their own constituents.

“Our legislators get caught in what’s going on at the national level,” Rebecca said. “It’s important to remind them that we’ve been having these conversations for years; that it’s more than just taxes; that VITA is truly a gateway for financial stability and education for the average taxpayer.”

Coming off these wins, you can say that CFED, the A&O Network and Taxpayer Opportunity Network are two for two in our advocacy efforts in 2015. But we are not surprised by this success, because advocates like Rebecca have been working on these goals for years. By continuing to elevate the voices and needs of low- and moderate-income communities, members of the community tax field have started off 2016 with two monumental legislative victories that will be felt immediately at tax sites across the nation.

“The work is so big, the funds so short [and] there’s so much need for the services we provide,” Rebecca said.

But now is not the time to slow down. Instead it is time build on this success and continue to advocate on behalf of additional policy improvements for tax preparation assistance and for a fairer tax system that benefits low-income households. We look forward to working with A&O and Taxpayer Opportunity Network members on these important issues in the coming year.

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Success! Congress Just Acted to Protect Working Families—Thanks to Tireless Advocacy Efforts

By Emanuel Nieves and Shervan Sebastian on 12/18/2015 @ 12:00 PM

Tags: Federal Policy, News, Taxpayer Opportunity Network, Assets & Opportunity Initiative, EITC, Economic Inclusion

Today, CFED, the Assets & Opportunity Network and the Taxpayer Opportunity Network can celebrate two hard-fought victories as Congress reached an agreement to make recent improvements to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) permanent and also rejected all legislative proposals that would have undermined consumer protections from being included in a must-pass spending bill.

As a result of the tax deal reached in Congress this week, 16 million families—including 8 million children—will no longer face the prospect of being pushed into or deeper into poverty in 2018. Instead, these families will now have the opportunity to be lifted out of poverty and will have access to increased financial opportunity and stability. Moreover, consumers across the country will continue to have the full strength of the Consumer Financial Protection Bureau and other regulators behind them, ensuring that consumer markets continue to be fair and responsible. These two victories are monumental achievements that will have a great impact on working families and individuals for years to come.

None of this was guaranteed, however, and many deemed the effort hopeless from the start, saying that protecting the CFPB and achieving a big tax deal in Congress would require a lot of luck given the inability of Congress over the years to take action on bold and widely effective legislation.

Well, it wasn’t luck. This was hard fought.

This week’s legislative victories are the direct result of sustained and tireless effort by advocates—including members of the A&O Network and the Taxpayer Opportunity Network—who work on behalf of low- and moderate-income families. It was only through this hard work that we are where we are today.

Over the last several years, CFED, the A&O Network and the Taxpayer Opportunity Network have been waging this fight. Our collective efforts were felt as recently as last month, as we worked with Network members to secure 64 Congressional meetings to make a clear and effective argument for why these provisions were needed. Our asks were simple: protect the CFPB and ensure that any deal made to provide tax breaks for businesses was balanced with tax credits that protected working families.

We also worked with Taxpayer Opportunity Network members to gather and publish stories of the effect that the EITC and CTC has on taxpayers who file their returns with the Volunteer Income Tax Assistance (VITA) program, making a clear case for the impact that these credits have on working families. And through our #ConsumerCantWait work, we’ve continued to push for the CFPB to be fully protected so that it can continue to guard all consumers from unscrupulous financial practices.

This is a lesson for 2016 – though it may seem tough, it may seem unimaginable and it may seem unachievable, we can and will succeed if we continue to ensure that the collective voices of low- and moderate-income families are heard on Capitol Hill.

While tomorrow will see us re-engage in the fight on behalf of hard-working Americans, we should be proud of what we’ve achieved this week and use these victories to continue pressing forward.

You can help make more victories like this possible! Find out more about how you can engage with the Assets & Opportunity Network or the Taxpayer Opportunity Network to advocate for low-income families and individuals in your community and across the country.

How Congress Can Protect Low-Income Taxpayers from Identity Theft and Refund Fraud

By J.C. Craig and Shervan Sebastian on 11/18/2015 @ 04:00 PM

Tags: Federal Policy, EITC, Taxpayer Opportunity Network

Identity theft and refund fraud are two of the most troubling issues that confront the nation’s voluntary tax filing system, but not all Americans are equally at risk. Low- and moderate-income households are hardest hit when these problems arise, due to their limited financial flexibility and lack of resources to deal with delays in receiving their tax refunds.

The Volunteer Income Tax Assistance (VITA) program—a nationwide network of IRS-trained volunteers—provides free tax preparation services to millions of Americans in every state and the District of Columbia and focuses on maximizing the EITC and CTC for low- and moderate-income individuals and families.

Many volunteers who have worked at VITA sites have had the experience of trying to assist a taxpayer who is dealing with IRS collections issues because a return prepared by an unscrupulous tax preparer contained either intentional or accidental errors.

Over the past few years, too many taxpayers have had dependents’ EITC and CTC benefits claimed in error. This forces individuals to go through an extensive process of providing personal information to the IRS in hopes that they can adequately and quickly prove both their identity and the validity of their refund claim. And too often, taxpayers have had their returns rejected by the IRS due to someone having filed a return using stolen identity information, including names, addresses and social security numbers.

It is finally time for Congress to take action to protect American taxpayers.

Today, CFED and the Taxpayer Opportunity Network submitted a letter to Chairman Hatch and Ranking Member Wyden of the Senate Committee on Finance on behalf of five provisions that should be included in the final version of the Bill to Prevent Identity Theft and Tax Refund Fraud. This would comprehensively address these concern and provide the security taxpayers need and deserve.

These provisions include:

  1. Increasing the penalty for improper disclosure of information by preparers of returns
  2. Providing the U.S. Department of Treasury and the IRS the authority to regulate all paid tax return preparers
  3. The VITA Act – increasing the appropriation for VITA and making the program permanent in statute
  4. Enhancing the IRS PIN program
  5. Providing safe harbor for minor errors on returns, payee statements and withholding

This letter provides a clear argument for how these provisions will help create a more transparent and secure tax filing process that minimizes the potential for fraud and tax filing abuses.

CFED and the Taxpayer Opportunity Network will remain engaged with the free tax preparation field to seek out solutions to these tax filing issues in both the short and long term. And we look forward to continuing to work with members of the Senate Committee on Finance to move this bill forward and into law in the near future—before more taxpayers are harmed.

Be part of the growing national network of practitioners and advocates delivering high-quality, low- or no-cost tax assistance and seeking policies that create a "right-side up" tax system. Join the Taxpayer Opportunity Network today!

Rainy Day EITC: A New Idea to Boost Financial Security for Low-Wage Workers

By Ezra Levin on 09/03/2015 @ 04:00 PM

Tags: EITC, Federal Policy, News

CFED believes the Earned Income Tax Credit (EITC) is a vital tool for helping create an opportunity economy, inclusive of low-income families. As we argued recently, the EITC—a refundable tax credit that helps boost the income of working-class families—is much more than it seems. At a January event on Capitol Hill co-hosted by CFED, sociologist Kathryn Edin described the findings of a book that found the EITC is more than an income booster: it helps families save, invest and move up the economic ladder. But as great as the EITC is, it was not built to contend with the recurring financial shocks that define low-wage life in America. The book authors suggested strengthening the EITC on this front, and we at CFED jumped at the idea, working with a number of our partners to develop a new proposal: the Rainy Day EITC.

Since our January Capitol Hill event, we’ve been working with the authors of the book, tax preparers from the Taxpayer Opportunity Network, and researchers and advocates in the financial security field to develop a new proposal that would help buffer low-income families from recurrent financial shocks.

The Rainy Day EITC would give low-wage workers a new tool to build emergency savings at tax time. The policy was designed to work as simply as possible: EITC-eligible workers would be given the option on their tax return of opting into the Rainy Day EITC. For a family that would have initially received $2,500 through the EITC, they would instead receive $2,000 now and defer $500 for later. Six months later, the IRS would automatically deposit that $500, plus a 50% match, into the family’s bank account.

The value of the proposal is that it maintains the benefits of the lump-sum EITC payment while addressing the fact that many low-wage workers don't have emergency funds. The $750 that a family would receive halfway through the year is enough to pay off a surprise medical expense or fix a broken car without having to rely on high-cost, often predatory payday loan products. In other words, the Rainy Day EITC is a clear way to protect consumers and boost financial security at tax time and beyond.

Of course, the Rainy Day EITC isn’t a silver bullet. Workers still need good jobs with good wages and good benefits. And, many low-wage workers need their entire tax refund as soon as possible, meaning not all workers will opt in. But for others, this reform would provide a new tool to help them achieve financial security year-round, rather than just during tax-season.

As we wrote in The Hill when we released the proposal, Congress has the power to create this powerful tool. By our estimate, the initial cost would amount to only about a 1.3% increase of current spending on the EITC. We are now talking with congressional offices to show them how this modest investment could help millions of low-wage families. We’re hopeful that, with the right champion, we can convert this new idea into law.

Congress Can Improve Tax Return Accuracy—Without Hurting Low-Wage Workers

By Tracy Fischman, Robin McKinney, David Marzahl, David Rothstein and Jeremie Greer on 08/28/2015 @ 10:00 AM

Tags: EITC, Federal Policy

Last month, the Senate Appropriations Committee included a very damaging paragraph in its 191-page financial services budget bill. Under the guise of reducing Earned Income Tax Credit (EITC) error rates, the bill would quintuple the number of pages low-wage workers need to complete to file their taxes. In other words, the bill alleges to increase compliance but would ultimately only increase complexity. This strategy will harm low-wage workers without tackling the problems it purports to address.

As members of the low-income free tax preparation community, we know the value of the EITC to taxpayers, and we work hard to file tax returns correctly. The Volunteer Income Tax Assistance (VITA) program, which is administered by the IRS and utilizes IRS-trained volunteers to serve low-income taxpayers, has a 94% accuracy rate. That’s better than any other large tax preparer in the country. In other words, #VITAWorks isn’t just a popular hashtag in the field—it’s actually true.

While reducing filing errors is a worthy goal, increasing the difficulty of filing federal tax returns is a highly ineffective method for accomplishing that goal. The National Taxpayer Advocate has repeatedly warned Congress and taxpayers of the negative impact the complexity of the tax code and the tax-preparation process have on taxpayer compliance rates. The booklet for filing the EITC for Tax Year 2014 was already 37 pages, substantially longer than the guidance for other credits and deductions. The Senate proposal would further increase that complexity and force self-preparers to answer many questions that are only applicable to paid preparers. The complexity of filing the EITC already contributes to the error rate; adding more burdens to the process will not help.

Furthermore, the vast majority of EITC claimants are not self-preparers, but rather file their taxes through paid commercial preparers. These paid preparers have higher error rates than self-preparers (and much higher error rates than returns filed through VITA). But the Senate proposal does nothing to address the compliance shortfalls among these preparers.

Competency testing and IRS oversight has contributed to making VITA one of the most accurate ways to file a tax return. However, the tax preparation field includes 40 million commercial preparers nationwide that are currently unregulated and many of whom lack adequate training, supervision or identification. Instead of placing additional burdens on low-wage workers, Congress should ensure that all tax filers have the information they need to file their returns accurately and that the paid preparer field is doing as good a job as VITA. That is why, earlier this year, Senator Ron Wyden (D-OR) and Senator Ben Cardin (D-MD) introduced the Taxpayer Protection and Preparer Proficiency Act, which would bring best practices to the commercial tax preparation field.

Increasing the filing burden for low-wage workers will not make their tax returns more accurate. Instead, it will create barriers for resource-strapped workers, which in turn will only decrease compliance and increase the number of tax filers who forego their earned credits due to the heightened difficulty of the process. Before piling up new burdens on low-wage workers, Congress should consider the Taxpayer Protection and Preparer Proficiency Act and related proposals to get workers the information and support they need to file their returns correctly.

Tracy Fischman is Executive Director of Prepare + Prosper.

Robin McKinney is Director of the Maryland CASH Campaign.

David Marzahl is President and CEO of the Center for Economic Progress.

David Rothstein is the Director of Resource Development & Public Affairs at Neighborhood Housing Services of Greater Cleveland.

Jeremie Greer is Vice President for Policy and Research at CFED.

At 45, the VITA Program Offers So Much More Than Just Tax Assistance

By Shervan Sebastian on 08/19/2015 @ 02:00 PM

Tags: EITC, Federal Policy

Marshall Hunt reviews tax return for accuracy

As the Volunteer Income Tax Assistance (VITA) program approaches its 45th anniversary, it continues to perform as one of the most effective and efficient federal programs in the country. But for millions of Americans, VITA stands for so much more.

With 12,000 sites operating in every state and the District of Columbia, VITA programs offer a range of tax assistance services that support America’s low- and moderate-income (LMI) communities.

To achieve this mission, leadership is critical. The Directors and Program Managers of each VITA program are tasked with serving as many applicable tax filers as possible and ensuring exceptional quality, while grappling and strategizing with limited financial resources.

Marshall Hunt, the Director of Tax Policy & Advocacy at Accounting Aid Society in Detroit, Michigan has spent the past 34 years working on tax assistance programs and now ensures that his VITA program has the greatest possible impact on the communities he serves.

Baltimore CASH tax site

Like many VITA programs, tax preparation is only the tip of the iceberg, as many sites offer additional support services as they see the need arise in their communities.

“Accounting Aid has a Small Business Services Program that offers tax education, consultation and tax preparation to get small business owners on the right track with their taxes,” Marshall explained. He added excitedly, “We have a Low Income Taxpayer Clinic that provides valuable services to taxpayers with controversies with the IRS. And the clinic also offers an ESL Education and Outreach program that provides tax education and outreach for taxpayers who speak English as a second language.”

Though each VITA program has a varied range of service offerings, the goal remains the same: helping LMI families file their tax returns for free to enable them to receive the maximum refund and engage in positive asset-building behavior.

Robin McKinney, the Director of the Maryland CASH program, began as a volunteer with the Annie E. Casey Foundation nearly 15 years ago and has been dedicated to advancing the volunteer tax assistance field ever since.

“I was very active in Baltimore CASH as a coalition partner and ended up starting Maryland CASH in 2007 to help bring VITA state-wide,” Robin said.

Maryland CASH free tax prep team

Robin has steadily worked to develop strategies that bring additional support services to residents across the state in order to help them reach financial stability.

“Maryland CASH works with a network of partners in 15 counties, which offer a variety of services. There are several that offer year-round tax prep, ITIN (Individual Taxpayer Identification Number) preparation, financial coaching, public benefit screening and access to savings products,” she said.

VITA programs, such as Maryland CASH, have been offering a mix of free tax preparation as well as asset building services to LMI individuals and families since 1971.

Today, it has expanded to process 3.6 million returns, which generated $3.9 billion in federal income tax returns for local communities in 2014.

Francesca Jean Baptiste, Senior Program Manager for Maryland CASH, has consistently evaluated the program to ensure that their services are helping clients overcome their financial challenges.

“We offer financial education classes on a variety of financial topics ranging from first-time home ownership to how to start a small business through our online platform,” Francesca said. “We also have a financial coaching program that uses technology to assist people with working towards their financial goals.”

Sara Johnson, the Campaign Director for Baltimore CASH, volunteered at an East Baltimore tax site in 2007 and became convinced that VITA tax prep was essential work that demanded her abilities and commitment.

“One of the programs I was managing was a resident leadership and engagement program, and I saw firsthand how residents were coping with financial insecurity in their community,” Sara recalls. “It was there that I learned in a tangible way the importance of VITA services, asset building and the EITC.”

Baltimore CASH site event. Photo by Kendra Scott.

During the 2014 tax filing season, VITA and the Tax Counseling for the Elderly (TCE) program prepared returns for nearly 734,000 households claiming the Earned Income Tax Credit (EITC) and more than 409,000 households claiming the Child Tax Credit (CTC), while also helping filers claim more than $82 million in educational tax credits.

With 96,000 volunteers committed to providing these services, Robin believes VITA helps address the long-term financial needs of residents in the community.

“I can’t tell you how many times someone said to me ‘you are the first person to explain my tax return to me,’” said Robin. “It is so important that people understand why they’re getting a refund or why they owe. It helps them plan throughout the year and to be able to better compare their return from one year to the next.”

But VITA doesn’t just help LMI filers get on a firm financial footing; it helps the IRS, too. With a 95.6 percent e-file rate, VITA saves the IRS millions in additional costs annually by filing the majority of returns electronically.

Having fully utilized an annual $12,000,000 appropriation from Congress, the VITA program is now functioning at capacity – limiting the number of additional tax payers that can be helped during the height of tax filing season. All it takes is one snow storm or one day of missed service to put lower income tax filers in a precarious position with limited options.

“Capacity is an issue that we are always dealing with,” Francesca said. “Many of our programs are at capacity and have very little room to grow without the addition of new resources.”

VITA presently serves over three million tax filers annually, but the IRS estimates that there are approximately 19 million individuals and families who would utilize the service if it was more readily available. That is why CFED and the Tax Opportunity Network are advocating for a $6 million increase to VITA for 2016.

Access to these services can make all the difference to a family counting on their tax returns to help them stabilize themselves financially and plan for the expenses ahead.

“It helps them to plan throughout the year and to be able to better compare their return from one year to the next,” Robin explained. “VITA provides a service beyond just the transaction of tax preparation. We provide education and build confidence in taxpayers that pays dividends for years to come.”

Congress Must Act to Save the EITC and CTC

By Shervan Sebastian on 08/03/2015 @ 02:00 PM

Tags: EITC, Federal Policy, Taxpayer Opportunity Network

Based on interviews with 115 EITC recipients. See Sarah Halpern-Meekin et al. It’s Not Like I’m Poor, 2015.

This week, dozens of Taxpayer Opportunity Network (TON) member organizations from across the country joined together to urge Congress to protect and strengthen two critical programs for low-wage workers: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Effective low-cost or free tax support helps families and individuals secure important benefits, reduce debt and meet their civic obligations as taxpayers, while setting them on the path to financial security and opportunity.

The EITC and CTC are essential to the mission of helping low- and moderate-income tax filers attain financial security. However, without Congressional action to save critical provisions of these credits before they expire, over 50 million Americans, including 25 million children, will lose part or all of their tax credits, making them financially vulnerable and putting them at risk of falling into poverty.

If the key provisions of the EITC and CTC are not protected, the struggles those at-risk will face will be devastating. For example, a single mother with two children who works full time at the minimum wage, earning $14,500 a year, will lose her entire CTC of $1,725. A married couple with three children and earnings of $35,000 will lose $1,200 from their EITC. For many of these workers and their families, their tax refund is what allows them to make ends meet. Congress must act to ensure these working families do not lose out.

However, it’s not just working families that stand to lose if Congress fails to act. The existing EITC does little to support low-wage workers without children. Fortunately, members of both parties are leading efforts to fix this. But unless Congress takes action, childless workers will remain the only group of workers that the federal government actually taxes into—or further into—poverty.

The free tax preparation field serves millions of Americans every year and sees first-hand workers who are striving to build a better life for themselves and for their children. To help them succeed, Congress should act as soon as possible to make these critical EITC and CTC provisions permanent and plug the gap in the EITC for childless workers.

TON Organization Signers

National:

Corporation for Enterprise Development

Arizona:

Arizona Conservatory for Arts and Academics

Baldz Promise Neighborhood

Catholic Community Services of Southern Arizona

Gila County Community Series

Gila County Housing Department

United Way – MESA

California:

Central Valley Community Resource, Inc.

Empire College

Financial Fitness Clinic

Fremont Family Resource Center

Jefferson Economic Development Institute

North Coast Opportunities Volunteer Network

San Francisco Housing Development Corporation

United Way of the Bay Rea

United Way of the Wine Country

United Ways of California

Colorado:

Denver Asset Building Coalition

Tax Help Colorado

Connecticut:

Connecticut Association for Human Services

Delaware:

Nehemiah Gateway CDC

Florida:

Catalyst Miami

Community Access Center

United Way of Northeast Florida

United Way Suncoast

Georgia:

Family Advancement Ministries

Hawai’i:

Hawai'i Alliance for Community-Based Economic Development

Illinois:

Center for Economic Progress

Heartland Alliance

Illinois Asset Building Group

Ladder Up

Woodstock Institute

Kentucky:

Cooperative Extension

Maryland:

Baltimore CASH Campaign

Habitat for Humanity of the Chesapeake

Montgomery County MD Community Action Board

Prince George’s CASH Campaign

Michigan:

Accounting Aid Society

Community Economic Development Association of Michigan

Michigan Economic Impact Coalition

Mid-Michigan Economic Impact Coalition

Minnesota:

Lakes & Pines CAC, Inc.

Prepare + Prosper

Missouri:

Gateway EITC Community Coalition

National Association of Black Accountants, St. Louis Chapter

Montana:

Montana Credit Unions for Community Development

Montana VITA Coalition

RDI Financial

Nevada:

United Way of Northern Nevada and the Sierra

New Jersey:

Latin American Legal Defense and Education Fund (LALDEF)

United Way of Northern New Jersey

North Carolina:

Vets-Help.org, Inc

Ohio:

United Way of Greater Cincinnati

Oregon:

CA$H Oregon

Pennsylvania:

Bucks County Opportunity Council

CEIBA

Just Harvest

New Life Federal Credit Union

Oakland Planning and Development Corp.

Texas:

Beyond Careers

El Paso Collaborative for Community & Economic Development

Foundation Communities

United Way of Greater Houston

United Way of Metropolitan Dallas

Virginia:

Thomas Jefferson Area EITC Coalition

Virginia Community Action Partnership

West Virginia:

United Way of the River Cities

Turning the EITC Into an Emergency Savings Tool for Low-Wage Workers

By Kathryn Edin, Sarah Halpern-Meekin, Sara S. Greene, Guest Contributors and Ezra Levin on 07/30/2015 @ 04:00 PM

Tags: EITC

Editor's Note: This post originally appeared on The Hill's Congress Blog.

“Thank God for tax season!” says Debra McKinley, a restaurant worker in Boston who relies on her tax refund – particularly the Earned Income Tax Credit (EITC) – to catch up on bills, afford a special treat for her daughter’s birthday and put a little savings aside for emergencies. But it’s nearly August now, and tax season is a distant memory. For many of us that’s just fine, but for McKinley and millions of low-income workers like her, it means anxiously counting the days until next year’s tax return.

McKinley is one of more than a hundred low-wage workers interviewed for the book, It’s Not Like I’m Poor. The EITC—often the most substantial part of their tax refund—is a financial lifeline for workers like her, but there’s one problem: it’s only available once a year.

As financial pressures mount throughout the year for families like McKinley’s, rainy day funds built up at tax time are often depleted. That means unpredictable events such as a cut in work hours can quickly lead to ballooning credit card debt or a trip to the payday loan office. Something as simple as a “check engine” light signals a looming, unbearable financial burden.

The EITC is the country’s largest anti-poverty program for workers, but it was not built to contend with the recurring financial shocks that define low-wage life in America. We have a plan that would give these workers the extra help they need when inevitable financial emergencies occur after tax season. We call it the Rainy Day EITC and it deserves attention on Capitol Hill.

Under the policy proposal, a worker who opts in to the Rainy Day EITC on her tax form receives most of the EITC (80 percent) during tax season and defers the remainder. Six months later, she gets a Rainy Day payment—the 20 percent she deferred and a 50 percent savings match.

For a typical low-wage family with an EITC of $2,500, this Rainy Day payment adds up to real savings. The family receives $2,000 at tax time, and six months later gets another $700. That $700 is larger than the typical pay day loan in America. It’s the difference between fixing the car when the check engine light goes on and just hoping for the best. It means a real financial cushion later in the year, after the boom times of tax season have receded into memory.

The Rainy Day EITC isn’t just the brainchild of ivory tower academics and policy wonks. It’s based on in-depth interviews from It’s Not Like I’m Poor with low-wage workers who value the “forced savings” mechanism of the lump sum EITC, but find themselves without a rainy day fund months later. The proposal was honed with input from researchers and administrators of low-income tax preparation programs from across the country.

The Rainy Day EITC isn’t a silver bullet. Many low-wage workers will need their full tax refund at tax time. But for many low-wage workers, the reform would provide a new tool to help them achieve financial security year-round, rather than just during tax-season.

Congress can create that tool through a relatively modest expansion of the EITC. By our estimate, the initial cost would amount to a little over 1 percent of current spending on the EITC. That relatively small expansion would help millions of workers add some stability to their often unstable financial lives. We believe it is well worth the investment.

Edin is the Bloomberg Distinguished Professor in the Department of Sociology at Johns Hopkins University. Halpern-Meekin is an assistant professor of Human Development and Family Studies at the University of Wisconsin-Madison. Greene is an Associate professor of Law at the Duke University School of Law. Levin is the associate director of Government Affairs at the Corporation for Enterprise Development, a national nonprofit focused on helping low- and moderate-income Americans save, invest, and build wealth.

The Highest-Impact Savings Program for Low-Wage Workers

By Ezra Levin on 07/16/2015 @ 02:00 PM

Tags: EITC, Federal Policy

Pop quiz: what’s the highest impact savings program for low-wage workers?

Here’s a hint: it’s a bonafide savings program geared at low-income families.

No, it’s not Assets for Independence--it’s actually more than 3,000 times bigger.

No, it’s not the Saver’s Credit, but it does run through the tax code, so you’re getting close.

OK, enough guesses: I’m talking about the Earned Income Tax Credit (EITC), which also happens to be the focus of our new Federal Policy Brief—The EITC: A Powerful Savings Program for Low-Income Workers.

Now I know what you’re thinking. The EITC? That’s not a savings program! First of all, calm down. Second of all, you’re partly right—the EITC was built to be a wage subsidy. The more hours you work (up to a point) the more EITC you get.

But a key feature of the EITC converts it from a wage subsidy into a savings program: the lump sum benefit at tax time. The EITC is only delivered at the end of the year, months after workers earn the benefit. A bit of every paycheck is deferred, building up that tax refund months later. In other words, the EITC functions as a forced savings program.

This isn’t just my funny way of looking at it. This how low-wage workers look at it—and they love that it works this way. Low-wage workers purposefully use the EITC as a savings tool. A new book, It’s Not Like I’m Poor, makes this point again and again, drawing on interviews with more than a hundred EITC-eligible workers. For example, for one working mother featured in the book, the EITC is “the only way to protect her resources from the demands imposed by frequent financial shocks.”

With that tax refund in hand, low-wage workers experience a rare period of financial slack—they can pay off debts, they can start to repair their credit and they can put away some savings for later in the year. This is how most of the EITC recipients in It’s Not Like I’m Poor use their tax refund. The researchers write that “it would be difficult to overstate the importance of the tax refund in generating savings and asset-building goals and helping families make progress toward achieving them.”

The EITC isn’t perfect. We focus in on three big issues:

  1. The EITC will shrink significantly if Congress fails to act to protect features that are set to expire.
  2. The EITC for childless workers is already pretty well shrunk. It currently provides little support to these workers.
  3. While the EITC effectively functions as a savings program, it wasn’t built to do that. That means workers that become financially secure at tax time often find themselves without any savings at all just a few months down the line.

CFED’s new Federal Policy Brief reviews the research on EITC, describes its crucial role as a savings program for low-wage workers and touches on fixes for these three problems. In the coming weeks, we’ll release a full-length policy paper describing an EITC reform to boost financial security beyond tax time. Stay tuned.

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