Part of First Nations’ mission is to provide financial education for Native American communities so that people can save, invest, prosper, and regain control of their assets. The goal is to help people learn to avoid financial pitfalls such as predatory lending practices that especially prey on American Indian people. As part of this effort, we recently completed a “how to” manual that provides instruction on how Native and rural communities can start a VITA site, or a “Voluntary Income Tax Assistance” program.
The publication is titled Tax Time Savings for Native Communities: Ten Best Practices for Effective Native VITA Programs. In compiling the report, we interviewed five model programs, and then captured lessons learned and best practices. We were supported in this work by the W.K. Kellogg Foundation, the Bill and Melinda Gates Foundation and The Paul G. Allen Family Foundation. The publication can be found in the First Nations Knowledge Center at this link.
Native VITA sites provide free income tax preparation services to tribal members living on reservations and in rural communities. These sites reduce the cost of tax preparation for low-income families and help them avoid expensive products such as high-cost loans against tax refunds. VITA programs also help tax filers access the Earned Income Tax Credit (EITC) and other credits. The EITC is a refundable tax credit for low- and moderate-income individuals and families with children. Unfortunately, millions of EITC dollars go unclaimed each year, especially in Native communities. In 2007, First Nations estimated that in some Native communities as many as 70 percent of qualified tax filers failed to claim valuable EITC refunds.
Most low- to moderate-income individuals have few options available to them as they try to fulfill their legal obligation to file their federal tax returns each year. Many turn to high-cost tax-preparation services that may encourage filers to take out expensive loans against tax refunds. Tax filers who qualify for the EITC use these high-cost tax-preparation services and loans at a higher rate than those who do not qualify, which means that they are more likely to lose a portion of their refund to unscrupulous or overpriced tax preparers. In an attempt to overcome these challenges, we created this report to encourage tribes, tribally-based organizations and other Native leaders to implement VITA sites in their communities and persuade Native tax filers to take advantage of the EITC.
Most rural or reservation-based Native VITA sites, unlike urban VITA sites, face a unique set of challenges. The geographic isolation, low volunteer retention rates, economically distressed communities, and overall distrust of the federal government among many Native Americans can limit the success of traditional VITA site models (models developed by the IRS). In this report, we proposed some best practices designed to address these unique challenges by developing culturally-relevant strategies, structures, and activities for launching and expanding successful VITA sites in Native communities.
First Nations derived these best practices from surveys and in-depth interviews conducted with five successful Native VITA sites last year, including:
The lessons and methods learned from these five model programs will be valuable resources for tribes, tribally-based organizations, and others serving Native constituents who are dedicated to improving the economic condition of their communities.
Related to this effort, we also recently awarded grants for innovative VITA programs. The recipients and grant amounts were:
First Nations believes that sharing information and models is an effective yet underutilized tool in Indian Country. We hope the report, and the information shared by these five organizations, will help other tribal leaders learn more about how VITA sites can help empower their communities.
By Sarah Dewees, Senior Director of Research, Policy and Asset-Building Programs