"Securing Tax Refunds for Families
By Lisa Muscara
Have you realized that it is "that time of year" again, checking the mail
each day for your W-2? Struggling through filing tax returns can be a difficult
task for anyone, but especially for our neighbors of limited means. Fortunately,
in Baltimore, there is some relief for low- and moderate-income taxpayers to
get assistance completing and filing their returns. As part of the Baltimore
CASH Campaign – Creating Assets, Savings and Hope – Maryland Volunteer
Lawyer's Service (MVLS) runs several clinics throughout the tax season, implemented
to help low-income clients prepare and file their tax returns, focusing on
"making work pay" by leveraging the tax code as a gateway to financial services
for working families.
This month, MVLS is focused on growing their ranks of trained attorneys to
provide pro bono tax services to low-income clients. As part of the CASH Campaign
network, volunteers are required to attend an eight-hour training and, upon
successful completion of the training and requisite test, volunteers earn their
certification as IRS VITA Volunteers. New volunteers interested in serving
as preparers can choose from eight trainings MVLS has scheduled during January,
to learn the skills needed to complete tax returns. These eight-hour trainings
cover basic tax law and the TaxWise software used at the clinic.
Not only do volunteers prepare and file tax returns, but they are trained
to knowledgeably screen clients to determine eligibility for Earned Income
Tax Credit (EITC). EITC is an important anti-poverty and work-incentive program
run by the federal government and select state governments. The EITC is targeted
to individuals and especially families who earn low to moderate wages. If a
worker qualifies, the EITC will lower or eliminate any taxes owed. If a worker
is not obligated to pay any taxes or if the credit is larger than any taxes
owed, the worker will receive a cash payment ("refund") from the Internal Revenue
Service (IRS) after filing a tax return. According to Rob Bader, MVLS's Director
of Tax Clinic,
"the Earned Income Tax Credit can be up to over $4,000 for some families, which
is a great benefit to them".
The impact of these clinics is profound. Last year, MVLS Tax Clinic volunteers
prepared returns for 342 families, 249 of which were households comprised of
single women with children. During that period, the MVLS clinics alone helped
clients obtain $1,086,959 of federal refunds and credits, and the average federal
refund for those who received one was $1,877. Across the city, last year's
CASH Campaign efforts resulted in 4,196 tax returns prepared, yielding $6,184,166
in federal refunds, $1,710,701 in state refunds and total federal EITC of $3,202,930.
Not only do these tax clinic sites help low- and moderate-income workers
receive the refunds to which they are entitled, the free clinics save hundreds
of dollars in fees that their clients would otherwise pay to have their tax
returns completed and filed. Working from 13 sites during the 2004-2005 period,
the CASH Campaign saved clients an estimated $630,000 in fees.
Oftentimes, this client population not only pays inflated fees to have their
taxes prepared, but regularly relies upon refund anticipation loans (RALs).
These are loans available from professional tax preparers, usually in the amount
of the anticipated tax refund, less interest and fees. While immediate cash
is a tempting prospect, these loans are outrageously expensive, with fees commonly
ranging from $40 to $100, which typically translates into annual percentage
rates of 70 percent to 500 percent! For tax returns filed electronically, as
those at the clinics are, with refunds deposited directly into clients' bank
accounts, most taxpayers will receive their refund in less than 10 days – a
win-win situation for clients. Using CASH Campaign sites, like the MVLS tax
clinic, they can avoid fees for filing and have their refunds deposited
to their accounts quickly.
If you are interested in learning more about how to help low- and moderate-income
families secure the tax refunds to which they are entitled, please contact
Rob Bader, Director of the MVLS Tax Clinic, at (410) 539-6800, ext. 226, or
Lisa Muscara is the former Director of Volunteer Services for the Pro
Bono Resource Center of Maryland.