Tag Archives: VITA

Wigamig’s Big Success Story is Good Example of VITA’s Big Value

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Last year, there were 145 VITA (Volunteer Income Tax Assistance) sites that served Native American communities, according to the IRS. These sites were sponsored by tribal governments, tribal housing authorities, Native and non-Native nonprofit organizations, senior centers, credit unions, tribal colleges and urban Indian centers.  First Nations Development Institute (First Nations) has also supported some of these Native VITA sites with grants, technical assistance and training.

VITA sites are a useful tool for providing free tax preparation services to low- to moderate-income people and helping them claim a range of valuable tax credits, including the Earned Income Tax Credit (EITC). In addition, they can help individuals avoid high fees for tax preparation services and also avoid being persuaded to take on high-cost loans against their tax refunds.

During the 2013 tax season these sites filed a total of 48,413 returns, facilitated $70 million in refunds and helped people claim approximately $26 million in EITCs, which is money that comes back to or stays in Native communities and benefits the entire community. Further, it is estimated that these 145 sites saved Native American filers $7.3 million in preparation fees alone, based on an estimate of $150 in fees per filer.

Data from several of First Nations’ recent Native VITA site grantees revealed the tremendous positive impact these programs can have in Native communities.  A report about this can be found on the First Nations Knowledge Center at this link: http://firstnations.org/knowledge-center/financial-education.

Wigamig Executive Director Fern Orie

One of First Nations’ VITA grantees is the Wigamig Owners Loan Fund, Inc. (www.wigamig.org/) in Lac du Flambeau, Wisconsin. It serves the Lac du Flambeau Band of Lake Superior Chippewa along with all Wisconsin Indian reservations. Wigamig offered up this anecdote as just one example of a tremendous success story stemming from its VITA effort:

“We had a client who had gone to a paid preparer for the past couple of years,” said Fern Orie, Wigamig executive director. “By Wigamig preparing the return and asking the appropriate interview questions, we discovered the family has an adult disabled son who they have not been claiming as a dependent on their tax return. In reviewing their previous returns from the paid preparer, we noted that they should file amended returns to claim their son for the prior years and recoup their appropriate refund and tax credits. In review and preparation of these amended returns, we discovered two errors totaling over $2,000. With these corrections and amending the returns, the clients will be receiving nearly $12,000 back from the IRS from two of their amended returns. This does not include a third year of an amended return that Wigamig is still processing. By educating clients, we are increasing their self-sufficiency.”

“VITA programs play an important role in providing affordable, appropriate financial services for Native families. We are proud to support VITA sites and their community partners that continue to bring resources into their local communities,” said Sarah Dewees, senior director of research, policy and asset-building programs at First Nations.

VITA is Vital to Native American Communities

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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

EITC is an Underused Economic Engine for Native Americans

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Where can someone find up to $6,000 to supplement their income? And what can be done with that found money?

The Earned Income Tax Credit (EITC) is one of the largest antipoverty programs operated by the federal government, defined by the Internal Revenue Service as a benefit for low- to moderate-income working people.  This tax credit can reduce or eliminate taxes owed and provide a refund even if no tax is owed.  A working family earning less than $50,270, depending on income and number of children, can receive credit up to $5,891. The IRS reports that last year’s average refund was $2,200. Yet the IRS estimates about 20% of eligible people do not claim the credit.

Eligible populations fluctuate yearly with financial, marital and parental status changes.  IRS Acting Commissioner Steven T. Miller estimated that this year, “millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit.” The 2013 tax-filing season begins January 30. To receive the EITC, workers must file a tax return, even if not required to file, and specifically claim the credit. Individuals can determine eligibility using the EITC Assistant at this link.

There are three free filing options:
1) Free File – Free tax software in a question-and-answer format helps filers prepare returns and claim appropriate credits and deductions. Free electronic filing is included.  Here’s the link.
2) Free tax-preparation sites – The IRS sponsors thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. Locations can be accessed at this link or by calling 800-906-9887.
3) IRS Taxpayer Assistance Centers – Free tax-preparation assistance for EITC-eligible workers is offered in locations across the country, listed online here.   Hours and services vary.

Now why is the EITC a powerful economic engine?  Because our work focuses on Native communities, we believe the EITC can be leveraged to build self-sufficiency and strengthen Native communities.  Last year, almost 170 VITA sites serving Native communities filed over 51,000 returns and brought more than $72 million to Native communities. This money was available for use in local communities rather than in border towns where Native returns are often filed if local tax preparation is not available.

When a refund is used to meet basic needs or to reduce or eliminate debt, the filer is in a better position to provide for his/her family and to contribute to the community. For a quick look at an example of the impact by EITC, see this online IRS video.   A few Native sites are connecting VITA clients to benefits such as food stamps, Head Start, tribal programs, and others.  Many sites use the tax-preparation process to introduce filers to financial and entrepreneurial education. Some help the unbanked open checking or savings accounts.  Some link clients to asset-building programs such as Individual Development Accounts, so savings goals can be realized faster. People saving and reaching their goals are increasing their self-sufficiency, setting an example for their children and positively impacting their community.

Many outreach tools are available to those interested in promoting the Earned Income Tax Credit.  Some sources are: http://www.eitc.irs.gov/ptoolkit/basicmaterials/ http://eitcoutreach.org/ http://eitcoutreach.org/2013materials

Native-specific customizable outreach poster http://www.oweesta.org/sites/oweesta.org/files/Oweesta_ad_6.75×4.5_2012.doc

If you are interested in learning how to help promote the EITC and VITA in Native communities, contact Patsy Schramm at edgpj@aol.com.  To find out how to help in other communities, see the IRS Partner Page here.

By Patsy Schramm (Cherokee), former IRS SPEC employee and current FNDI consultant