Tax time is ideal platform for financial-education outreach

It's the time when residents across the country think about preparing their tax filings -- and that often translates into stress for a lot of people, especially new homebuyers facing the task of itemizing for the first time. For organizations that offer financial education and counseling programs, it's an ideal opportunity to build your community visibility and reach new clients. The op-ed below was issued nationally by NeighborWorks America, but could easily be adapted for placement in local media, newsletters, etc. 

Don't be 'taken' this tax season

By Marietta Rodriguez, vice president of mortgage programs for NeighborWorks America

Marietta Rodriguez

All of the data aren't in yet for 2013, but it's safe to assume that hundreds of thousands of people became first-time homeowners last year. Becoming a homeowner also means that many people for the first time will find it beneficial to itemize their tax returns. The advertisements about using a paid, professional service for completing and filing tax forms are filling the airwaves, newspapers and other media. Most of these advertisements promise friendly and fast service. But few if any of these ads disclose the cost.

According to a study by the National Society of Accountants, the average cost of tax-preparation services in 2012 individuals without itemized deductions was $143 for a 1040 form and an accompanying state tax form. The same survey found that the cost to have a longer, itemized tax return completed -- required by most homeowners -- was $246.

To put those costs in the context of everyday household expenses, $246 is slightly above the average monthly winter utility bill forecast by the U.S. Energy Information Administration.

How to avoid the cost of tax preparation fees

But taxes are complicated, especially for consumers who have never itemized deductions before, which is usually the case for first-time homeowners. So, isn't using a professional tax preparer a good idea?

It is a good idea to seek trained help, especially if it is available at little to no cost. And that kind of help is available for many people, especially those with low- and moderate incomes, whether homeowners or not.

More than dozens of NeighborWorks organizations and their local partners are ready to work with taxpayers on their forms. NeighborWorks organizations and other community-based nonprofits offering tax preparation services typically do so as part of the Internal Revenue Service's Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. The VITA program is limited to people who make less than $51,000 -- about the median income in the United States -- while the TCE program is limited to filers who are 60 years or older.

In 2012, more than 92,000 people volunteered to help and more than 3.3 million returns were filed by all VITA sites around the country-- all at no cost.

The attraction of 'fast-money' tax services

Many advertisements for tax-prep services also promise fast refunds – a prospect that is particularly alluring to low-income individuals and first-time homebuyers. However, these refund advances or loans should be avoided.

The truth is, refunds from tax returns filed electronically are available  within a week or two, making the fees charged for on-the-spot "advances" of highly questionable value. According to an analysis of 2012 refund programs by the National Consumer Law Center, the average annual interest rate charged for a quick refund loan exceeds 100 percent. No homeowner would be willing to pay such a rate for a mortgage, and there's no reason anyone should pay that kind of  fee just to receive the money they earned.

So collect your W-2 and other financial documents for 2013 and head over to one of the hundreds of locations that offer free tax-prep services.  A list of locations can be found on the IRS website. It's worth it.

How Tax Prep Sites Help Recruit New Clients

By Darren Hamm,
deputy director, NHSGC

The yearly obligation to file taxes is often a rare opportunity for people to really reflect on their finances and to connect with community organizations that can help them year-round. This can help save them money and help nonprofits reach new clients.

Last year Neighborhood Housing Services of Greater Cleveland (NHSGC) started a financial capability program and this tax season marks the second year of our first Volunteer Income Tax Assistance (VITA) program, which helps Cleveland residents of lower incomes receive free help filing their taxes. We chose to run this VITA site because, if you’re talking about asset building, there’s really nothing more direct than saving someone $450 in tax prep and having their refund— often 50% of their annual income—invested in the local environment (utilities, groceries, car repair, tuition) or helping that person pay down debt.

So far this season, NHSGC has assisted in returning more than $750,000 in income tax returns to more than 400 people throughout northeast Ohio, further saving these taxpayers more than $160,000 in filing fees.  This is great for the residents and it’s also an important way for NHSGC to reach new clients.

We identify potential clients by having VITA site tax filers complete surveys on how they will use their refund, their biggest challenges financially and other such questions that can assess their financial capability. We then connect tax filers to services that can address those needs. Sometimes the services are ones we provide and other times we connect tax filers to our local partners. Our hope is that those who haven’t worked with us yet will remember we are here if need arises.

Volunteers from Charter One Bank and Darren Hamm, NHSGC

This approach has already paid off for us and for our new clients. In the past few months we’ve assisted tax filers with foreclosure, helped them register and take homeownership courses, and apply for home repair loans. We’ve been able to help these new clients because they share many characteristics with our current clients, such as geographic location. However, as a group, the new clients/tax filers are more likely to rent than own and they generally have more modest incomes, so we keep that in mind when explaining our services.

Overall, we feel it’s been a successful tax season and we hope to maintain relationships with clients in the coming year.  To close out, we’re hosting a Super Saturday event on April 13 in partnership with Charter One Bank. Tax filers will have their taxes prepared, learn about opportunities to save their tax refund, and be entered into a Cleveland Saves drawing for opening up a savings account on site.

The Transformation of a Tax-phobe

Elena Kaye-Schiess, AmeriCorps VISTA
with NeigborWorks Rural Initative

When I used to think about filing my taxes, I pictured myself standing at the edge of a cliff with my head turned away and my eyes closed while I dropped my stack of tax documents into the abyss. On the one hand, I considered the IRS a black abyss where as long as nothing came back out to bite me, I was golden. On the other hand, my understanding of what exactly I was sending was analogous to holding my breath and crossing my fingers.

Last year I first heard the terms EITC and VITA, or Earned Income Tax Credit and Volunteer Income Tax Assistance sites, through an a collaboration of NeighborWorks America's Rural Initiative and the NeighborWorks America homeownership team. The teams were working together on an open grant round to build the capacity of VITA sites operated by NeighborWorks organizations across the country. I learned about the impact NeighborWorks organizations have had in their communities through VITA sites that help residents correctly file their taxes and access the EITC, and how support from NeighborWorks America has enabled the organizations to efficiently and effectively reach more residents in their service areas.

VITA volunteers at Urban Edge help residents access their tax advantages

The EITC is one of the federal government’s largest anti-poverty programs, and each year it helps lift an estimated 6.6 million people above the poverty line. However, because workers move in and out of eligibility based on changes in their marital, parental and financial status, awareness is critical. About one-third of the EITC eligible population turns over each year, and this year millions of workers will qualify for the EITC for the first time (www.eitc.irs.gov).

Photo: Creative Commons, seniorliving.com

VITA sites bridge the awareness gap to help ensure those who qualify can claim the credit. The IRS works with national partners, community-based coalitions and thousands of local partners and governments, including many NeighborWorks organizations, to establish sites around the country. IRS-certified volunteers will provide free basic tax preparation and education about the EITC, as well as other credits individuals may qualify for. Benefits screening is also available to determine eligibility for services such as SNAP (Supplemental Nutrition Assistance Program) and LIHEAP (Low-income Home Energy Assistance Program).

Working on this project made me realize it was time to pull back the curtain on my tax aversion.  I became certified to volunteer at a VITA site operated by a NeighborWorks organization in my community. A year later I’ve not only become a VITA volunteer junkie, but I also incessantly hound my friends and family about how the EITC is a critical asset-building initiative, and how fantastic it is that there is probably a site in their community where they can sit down with a real live person who will prepare their taxes for free while explaining how the process works.

While volunteering with Urban Edge last year, I watched as many clients came in for tax prep, but when they learned about the financial education services Urban Edge also offered, such as first-time homebuyer education and credit counseling, they signed up for those as well. The CDC’s VITA role acted as a gateway for community members to get involved in the broader programs also available.

A friend recently told me about a new iPhone app where all you have to do is snap a picture of your W-2s and it will automatically populate your tax form for you. The old tax-phobic me would have probably thought this was a fantastic idea, but instead I had a much better recommendation to share: go visit a VITA site, and someone will help you prepare and file your taxes for free.

Want to learn more? Below is a partial list of NeighborWorks organizations which offer tax preparation services:

• Affordable Homes of South Texas (Texas)
• Arbor Development (New York)
• Family Services Inc.(South Carolina)
• Little Dixie Community Action Agency (Oklahoma)
• Midwest Minnesota Community Development Corporation (Minnesota)
• Neighborhood Development Services (Ohio)
• Neighborhood Housing Services of Greater Cleveland (Ohio) 
• Neighborhood Housing Services of New Orleans (Louisiana)
• Opportunities for Chenango (New York)
• Pathfinder Services (Indiana)
• Pathstone (Indiana, New Jersey, New York, Ohio, Pennsylvania)
• Urban Edge (Massachusetts)

A full list of all VITA tax sites is available on the IRS website: http://irs.treasury.gov/freetaxprep/