January 24th, 2008
Every year, about 65 percent ofAuburn’s low-income residents pay an average of $200 apiece to commercial tax preparers to take advantage of the Earned Income Tax Credit when they file federal income taxes.
That may change this year, thanks to the launch of a new program called SaveFirst that will provide free income tax preparation services to those families.
The local program is a collaboration among the city ofAuburn, Regions Bank, Auburn University and Impact Alabama.
“They usually have just a W-2, and their taxes can be done by a college student with a little bit of training,” says Stephen Black, who founded ImpactAlabamafour years ago. SaveFirst is one of three service-learning projects involving educational institutions throughout the state.
The EITC is the federal government’s largest and most successful antipoverty program for low-income working families, Black said. But the benefit to those same families is eroded when they take out predatory refund anticipation loans with interest rates of up to 800 percent, he noted.
About 3,000 families in the city ofAuburnclaimed an estimated $5 million through the federal EITC in 2004, he said, but the same families lost $350,000 to commercial tax preparers through preparation fees and refund anticipation loans.
In fact, statewide more than 481,000Alabamafamilies claimed an estimated $1 billion through the federal EITC, but spent $72 million on tax preparation and refund anticipation loan costs.
Black said Alabama ranks 49th in the nation in terms of the percentage of families paying commercial preparers and taking out refund anticipation loans.
That’s why Impact Alabama two years ago started its SaveFirst program in Tuscaloosa and Birmingham. This year, the program has been expanded to seven cities, including Auburn.
The goal of the SaveFirst initiative is to train college and graduate students to offer free tax preparation services and other services to low-income families.
Students from the class of political science professor Steven Brown will be providing the service as a required part of their course work.
“They learn about the EITC, and about hat it means to be a working family with children making $25,000 a year,” Black said. “We actually had to turn down a couple of other professors. Because this is the first year, we won’t be able to advertise extensively enough to have enough people to keep more students busy.”.
The service will be provided free between Jan. 23 and Feb. 23 at the Boykin Community Center at 400 Boykin St. in Auburn.
Working families making less than $40,000 a year with children in the home are eligible for the service, as are working families making less than $20,000 a year if there are no children in the home.
Impact Alabama is training some 275 college, graduate and law students from 11 campuses across the state to provide the free tax preparation as well as financial literacy information and other information to working families.
Daytime, evening and weekend hours are available. For an appointment, call (877) 578-8778 toll-free.
