Virtual Volunteer Income Tax Assistance Offered in Elbert County

Summary

The Family & Consumer Sciences agent in Elbert County recognized the value of the Volunteer Income Tax Assistance (VITA) program offered through the Internal Revenue Service and decided to partner with UGA teaching and research faculty as well as UGA students to offer Virtual VITA to the residents of Elbert County.

Situation

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund. To qualify for EITC you must have earned income from working for someone or from running or owning a business or farm and meet basic rules. And, you must either meet additional rules for workers without a qualifying child or have a child that meets all the qualifying child rules for you. The Earned Income Tax Credit (EITC) can be a significant increase in annual income for limited resource families. According to the National Consumer Law Center, low- and moderate-income households rely heavily on their tax refunds each year for a much-needed cash infusion into otherwise strapped household budgets. But once again, the Internal Revenue Service (IRS) was required to delay until mid-February the entire refund requested by taxpayers claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). This delay, first implemented in 2017 under the Protecting Americans from Tax Hikes (PATH) Act, was intended to give IRS more time to stop fraudulent refund requests. Tax-time financial products offered this year include: Refund Anticipation Checks (RACs) – RACs provide a way for unbanked taxpayers to receive refunds by direct deposit, check, or a prepaid card. The product essentially serves as a short-term loan of the fees a consumer would otherwise pay out of pocket to have the return prepared. Types of refund anticipation loans (RALs): • “No-fee” RALs – Consumers supposedly pay nothing for these RALs, but some preparers may recoup costs by imposing additional fees or other indirect charges. • Interest-bearing RALs – These loans have disclosed interest rates from 24% to 45%, but disclosures may not accurately reflect these costs because of additional fees. The delayed refunds for recipients of the EITC and Additional Child Tax Credit (ACTC) to mid-February or early March have likely driven the demand for RAC’s as well as RALs by EITC and ACTC recipients since many times low-income taxpayers pay for tax preparation services and are enticed with the idea of receiving part of their refund immediately and agree to a high-cost, low value refund anticipation loan, eroding the positive effects of tax credits. Due to IRS policy on data sharing changes, the most recent available data is from 2017 when about 20.5 million consumers obtained a RAC, at a cost of at least half a billion dollars. Refund Anticipation Checks (RACs), commonly called “Refund Transfers” in the industry, remain the most common tax-time financial product according to the National Consumer Law Center. With a RAC, the preparer receives the refund in a temporary bank account, deducts the tax preparation fee and any other authorized fees, and then disburses what’s left to the consumer, often on a prepaid card. Average RAC fees hover around $30 to $40. A consumer who pays $40 to defer a tax preparation fee of $300 for three weeks could be seen as paying an annual percentage rate (APR) of 232% for a short-term loan to pay this fee.

Response

After pilot testing VITA virtually in 2017, Virtual VITA was made available to agents across the state with funds from a UGA Extension Innovation Grant. The Elbert County Family & Consumer Science Agent, UGA teaching and research faculty as well as UGA students, became trained and certified to process taxes through the Volunteer Income Tax Assistance (VITA) for the Internal Revenue Service. Virtual VITA requires one meeting with clients to gather needed documents and complete needed IRS forms and a second meeting to review their tax return virtually with one of the UGA students who helped prepare the tax returns on campus. Free tax assistance and e-filing for basic returns was offered by appointment at the Elbert County Extension office.

Impact

Elbert County Family & Consumer Sciences agent, with the support of the Virtual VITA volunteers on campus at UGA, completed 26 returns with Federal refunds totaling $27,318 and state refunds totaling $4,841. Over $12,721 of the total refunds were from Earned Income Tax Credits and an additional $10,540 from Child Tax Credits or credit for other dependents. More than $7,800 was saved in tax preparation fees by Elbert County tax filers.

State Issue

Community, Home, & Life Skills

Details

• Year: 2020
• Geographic Scope: County
• County: Elbert
• Location: College Station, Athens
• Program Areas:
  • Family and Consumer Sciences