The IRS’s Volunteer Income Tax Assistance (VITA) and Free File programs are tax preparation services that ensure low- and moderate-income taxpayers can prepare and file their (often not-so-simple) returns for free. In fact, 70% of all taxpayers are eligible for these no-cost, high-quality, consumer safe tax preparation services. More than 6 million people use them each year, putting billions of dollars back into their pockets.

MG_5932To highlight these essential IRS programs and the value they bring to the tax ecosystem, I participated in CFED’s Capitol Hill policy forum in honor of VITA Awareness Day on March 15. All the speakers provided thoughtful insights and a couple themes resonated for me during the almost 2 hour discussion – the tax time moment as an opportunity for financial stability and the myth of simple-filers.

Importance of the Tax Time Moment

Former IRS Commissioner and current CFED board member Fred T. Goldberg inspired all of us with his passionate reminder that the annual tax filing ritual is a platform for families to build financial security and savings via the split refund, a program he championed for years. Fred challenged us to innovate to reduce friction in the filing process so that that it is easier to help families turn the refund into savings through 529 education savings plans, the U.S. Treasury Department’s new myRA retirement savings initiative and others.MG_0042

We also need to think holistically about how we provide services to low- and moderate-income households at the tax time moment and throughout the year. Some innovative VITA sites take a comprehensive approach to the tax-time moment, over and above tax preparation and filing assistance. For example, the Food Bank for New York City is integrating financial counseling at the point of VITA service delivery to help individuals and families walk away more informed and empowered to take steps toward financial wellness.

Unlike any other point during the year, tax time can be a key moment to take note of one’s finances, see what worked and what didn’t work and perhaps save some of the tax refund for a rainy day.

Not-So-Simple Returns

CFED President Andrea Levere noted in her concluding remarks, “Let’s stop talking about simple filers,” because the reality is that income volatility and complex family situations make for not-so-simple returns for many low- and moderate-income families. Taxpayers, rightly so, want to understand andMG_0083 get every credit for which they are eligible, yet the rules that govern eligibility for programs like the earned income tax credit (EITC) and child tax credit (CTC) are complicated, making it difficult for families to correctly file their tax returns.

Many of the current federal income tax rules were crafted for the 1950’s Ozzie and Harriet family, a family that is no longer the norm, particularly in low- and moderate-income communities. The Tax Policy Center reports that complexity in family structure is growing, as non-marital births, complex custody arrangements and multiple generations of families living together are more common. Today, half of all children spend some of their childhood in a family structure outside the 1950’s norm of two biological, married parents. The authors of the report Increasing Family Complexity and Volatility: the Difficulty in Determining Child Tax Benefits, conclude that “[b]ecause of these changes in family structure, tax filing has become more complex for many and will likely continue to grow more complex.”

Taxpayers often look to community-based VITA sites and the tools provided through Free File to help them navigate the web of tax filing complexity.

“It takes a lot of money to run a free program”

This comment from Francesca Jean Baptiste of the Maryland CASH campaign is an insightful reminder that financing VITA is critically important and, to truly leverage the tax time moment, our VITA organizations need the funding to provide a broader range of services. Francesca’s description of the work she and Maryland CASH do on behalf of their community was truly inspiring.

To say “VITA is vital” is more than a catchy phrase; it’s evident in the financial wellness opportunities the tax-time moment offers and in the complexity that our tax code creates for low-wage workers claiming benefits. For these reasons, Intuit is proud to partner with VITA sites across the country to help them provide eligible taxpayers with the tools to prepare and electronically file their tax returns for free with IRS Free File. My thanks to CFED for including Intuit on the panel of presenters and allowing us to add our voice of support to helping low and middle income taxpayer access the free, high-quality and consumer safe tax assistance programs that best meets their needs.


The post was first published on CFED’s blog The Inclusive Economy