Why volunteer tax preparation is key to keeping Americans out of poverty

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Startup Stock Photo

Millions of low- and moderate-income working families in the United States benefit from a couple of key tax credits that are among the most important ways that we keep people out of poverty and support children’s development. But to receive these tax credits, families need to file a tax return, which can be a costly and confusing task for Americans who are already working long hours and struggling to get by. Fortunately, working families across Oklahoma have a free option when preparing their taxes.

The Volunteer Income Tax Assistance (VITA) program is available to families making less than $54,000 a year who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to people across Oklahoma. Included in the services they provide for tax payers is information about special tax credits for which they may qualify, such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Last year, the average refund for those filing returns with VITA was $1,422.

VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. In the Tulsa region, the Tulsa Area United Way provides many of the sites. In Oklahoma City there are locations at community colleges and churches. You can find a list of these VITA sites and sites across the state here.

Now in its 45th year, the VITA program plays an integral role in ensuring that working families receive vital tax refunds. For example, last year the VITA program was responsible for $1,321,147 received through the EITC. In addition to the federal EITC, Oklahoma also provides a state EITC, matching 5 percent of the federal tax credit. Many of the same families eligible for VITA services qualify for the EITC. If the worker has at least one child and earns below about $39,000 to $53,000 (depending on family size), they may be eligible for the federal EITC.  Even workers without children who earn up to $14,800 may qualify for a smaller tax credit under the EITC. This credit is designed to incentivize work, because for every dollar earned up to a cutoff, the EITC benefit increases.

While EITC earnings build up throughout the year, the accumulated benefit goes out only after taxes are filed, so it operates similarly to a savings account. Many workers use this annual financial boost for asset building. For example, a study of 3,000 EITC payment recipients showed that they are more likely than workers who receive non-EITC refunds to use the payment to pay down their debt.

The EITC and other broad-based working family tax credits go beyond extra cash in people’s wallets — they promote work, reduce poverty and support children’s development. These benefits are especially important because the “welfare” cash assistance has been reduced to almost nothing in Oklahoma and many other states. Therefore the broad-based tax credits have become our main tools for lifting millions out of poverty — more than 10 million in 2014, including more than 5 million children. Tax refunds are a core part of the safety net in today’s America, and the VITA program is an essential key to help millions access that safety net.

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