Fighting Poverty with Free Tax Preparation
A few weeks ago, you could almost hear everyone in America let out a collective sigh of relief: tax season was over. But that was small compared to the relief felt by volunteers of the Volunteer Income Tax Assistance (VITA) program. These unsung heroes, who number in the tens of thousands, spent the last several months helping low-income tax filers complete 1.4 million tax returns and access tax credits. And this year, for the first time, I joined their ranks as a volunteer tax preparer.
Monday nights were an adventure at Jubilee Jobs, a nonprofit in northwest Washington, DC located in a renovated townhouse. The volunteers were students, lawyers, journalists, government workers and other folks looking to give back. There was no standard tax filer—we never knew who was going to walk through the door. Clients would check in with a receptionist and fill out paperwork, lining up in plastic chairs in the narrow foyer.
Each household was different, and, as volunteer tax preparers, we were trained to tackle a range of circumstances. For example, the first household I worked with was a couple from South America. They were deaf, English was their second language and it was their first time doing their taxes together. It goes without saying, it was a late night for all three of us.
Many households had been coming to VITA for years and trusted the site and its volunteers to get their taxes done right (VITA has a 93% accuracy rate—one of the highest in the tax preparation industry). Sites pride themselves on connecting low-income households with tax credits others can miss, like the EITC (Earned Income Tax Credit) and CTC (Child Tax Credit).
Helping clients claim refunds at tax time can make up as much as 30% of a low-income family’s annual income. Folks told me their refunds would go towards things that made a difference in their families’ lives: child expenses, transportation, debt repayment, education costs and future savings.
VITA is a true community program with sites in every state. It has existed since 1969 and has been federally funded since 2007. As a matching grants program, every dollar the federal government contributes to VITA is matched one-to-one by local, state or private funds. And since it’s the Volunteer Income Tax Assistance program, most of the folks doing the taxes are unpaid. There are roughly 4,300 VITA sites around the country that generated over $2.1 billion in refunds in 2017 to assist households earning less than $54,000 in annual income.
When I talk to folks about VITA, everyone agrees it’s a great program. But many ask: what do low-income families do if they don’t know about VITA? While most of us do our taxes with online tax preparation software, this is not always practical for households who may not have internet access or may need extra support claiming complex tax credits, especially if they are elderly or disabled.
Some low-income families go to a paid tax preparer, but this costs the average household $273. Given that, according to the Federal Reserve, almost half of Americans don’t have $400 to cover a financial emergency without borrowing money or selling something, these annual savings at tax time can make a real difference in their financial security. And while the person I pay to trim my curls must be certified to cut hair, in most states paid tax preparers have no such certification requirements. But every VITA volunteer is trained and takes (and passes) an IRS certification exam. I took mine on a Sunday afternoon, and it took me three hours to complete—no small task!
Unfortunately, even though VITA has been around for half a century and is known for being a model public-private partnership with high quality standards and results, the VITA program has never been put into law by Congress. But exciting developments are happening in the world of VITA policy.
Appropriately on Tax Day 2018, the House passed a bill that would make the VITA program permanently authorized. Under this legislation, the IRS would administer the program and ensure that VITA grant recipients would continue to maintain strong records of accuracy and save taxpayers money. Sites would have more certainty that the program will continue and potentially more support as we advocate for funding each year.
Funding for VITA sites primarily goes to staff time to coordinate the program and train volunteers as well as marketing and the cost of equipment and supplies. For the past few years, VITA has been funded at $15 million. With increased funding, the VITA program can hire new staff to coordinate the program, add new VITA sites, substantially improve volunteer recruitment and increase outreach efforts to low-income households.
With only one year under my VITA belt, even I can tell that with the new tax legislation passed in December, next year’s tax season is going to be complicated for every tax filer. A major part of the VITA program is educating low-income clients on the how, what and why of their refund or payment to the IRS. We VITA volunteers will need much more time explaining changes in the tax code to clients.
Increasing support for VITA will help sites navigate this critical season and support tax filers grappling with the new tax law. The VITA program is a high-impact, low-cost initiative that has historically been under the radar. Take a deep breath and jump into supporting VITA’s future. With increased support by Congress and more volunteers (that means you!), the program can grow and continue to help more and more low-income clients every year.