January 2008
By Robyn Bradley Litchfield
With help from Impact Alabama’s SaveFirst Initiative, Montgomery’s lower-income residents will wind up with more money from their 2007 tax returns.
In 2007, the initiative provided free income tax preparation services to more than 300 lower-income families inBirminghamandTuscaloosa. This year, the program is expanding and will includeMontgomeryand six other cities across the state.
The organization will train about 275 college, graduate and law students from 11 campuses acrossAlabama. These volunteers will prepare taxes for working families making less than $40,000 a year with children in the home or $20,000 a year without children in the home.
The service is aimed at assisting families eligible for the Earned Income Tax Credit (EITC). The EITC is the federal government’s largest and most successful anti-poverty program for low-income, working families, but about 70 percent of Montgomery’s EITC recipients pay an average of $200 just to access the benefit, Impact Alabama founder Stephen Black said.
“Two hundred dollars is a huge chunk if you only make $20,000 to $40,000 a year,” said Black, whose organization is based in Birmingham and Tuscaloosa.
Black went on to say that Alabama ranks 49th in the nation in terms of the percentage of families paying commercial preparers and taking out “refund anticipation loans,” or “rapid refunds,” at percentage rates of up to 800 percent, further eroding the benefits of the EITC.
About 29,000 families in Montgomery claimed an estimated $73 million through the EITC in 2004, but these same families lost $4 million to commercial tax preparers through preparation fees and “rapid refunds,” he said.
InMontgomery, the free tax preparation program will be set up in the Jubilee Community Center on South Goldthwaite Streetlater this month through early February.
In addition to working on taxes, volunteers also will provide financial literacy information and opportunities for economic improvement to working families.
For more about ImpactAlabama’s SaveFirst Initiative and to get involved, email Black at stephen.black@ua.edu.
