By Catherine Godbey
Jan. 19, 2010
Tax preparation fees in Alabama cost an average of $250, an amount many working-class families cannot spare and will not have to because of efforts of college students and retirees.
The volunteers with SaveFirst and the Retired and Senior Volunteer Program are providing free tax preparation services toNorth Alabama residents.
Staffed with college students, SaveFirst, an initiative of Impact Alabama, focuses on offering no-cost tax services to households eligible for the Earned Income Tax Credit.
For residents who do not qualify to receive assistance from SaveFirst, the Athens-based Retired and Senior Volunteer Program also provides free tax preparation.
“We are basically looking to help the elderly and low income but will help anyone who walks in,” said Betty Ruth, the program’s director.
Prospective clients do not need to schedule an appointment at either of the program’s sites in Athens or Decatur.
SaveFirst, which started as a two-city operation in 2007 filing 311 returns, expanded to 12 cities last year processing 2,676 returns. In 2009, the initiative generated $4.7 million in tax returns, saving low-income households $669,000 in service fees.
Heavy demand
“The demand we are seeing far outweighs our ability to serve the communities,” said Stephen Black, Impact Alabama founder.
With the recent economic climate, organizers expect demand to increase, a trend both SaveFirst and the Retired and Senior Volunteer Program have seen in recent years.
“People who have been paying providers are coming to us because they do not know where else to go,” said Laurie Lincoln, communications manager for the Community Action Partnership of North Alabama. “They can possibly pay the $140 for a tax preparer but are hurting so bad they need to save that money.”
According to the National Society of Accountants, the tax service fee in Alabama, Tennessee, Kentucky and Mississippi averaged $137 for a basic return. Black said most households in Alabama pay at least $250.
“Think about $250. To an average family that’s the equivalent to eating for more than a month,” Black said. “Think about how high the natural gas bill is going to be for the month after this cold weather.”
SaveFirst’s eligibility requirements include annual earnings of $49,000 or less for one- or two-parent households with children. Adults with no children who earn $20,000 or less are also eligible.
Students from The University of Alabama and The University of Alabama in Huntsville will begin processing returns Jan. 23.
Lincoln advised people who do not meet income eligibility but who have recently lost a job or had a drastic change in income to contact SaveFirst.
“SaveFirst wants to help people. That’s what they are here for. Before assuming you can not receive assistance they need to check with the organization,”Lincoln said.
Black predicted the initiative will serve more than 3,300 households inAlabama. But even as SaveFirst reaches more households, many local families still face mounting tax fees. Black said about 82 percent ofDecaturresidents eligible for the Earned Income Tax Credit pay an average of $200 to access the benefit.
Many also apply for predatory refund anticipation loans on their refunds, Black said. The annual percentage rate of the loans can reach 800 percent.
The initiative impacts the clients as well as the volunteers. “There are 500 students who will be processing the tax returns,” Black said. “This gives them a glimpse into the lives of working families with little to no savings who are living pay check to pay check.”
Retirees help
Ruth advised residents with rental property and who own businesses to seek advice from a professional tax preparer.
After filing 2,000 returns in 2008 and 1,500 returns in 2009, Ruth expects the program’s 15 volunteers to file at least 1,000 returns.
“It is a conservative estimate, but it’s safe to say we will reach the 1,000 mark again,” she said. The Internal Revenue Service trains and certifies the volunteers.
Sidebar:
Tax refunds and fees
• 5,400 families inDecaturclaimed $12 million through the Earned Income Tax Credit in 2006. Tax preparation and refund anticipation loan expenses cost those households $1.2 million.
• More than 492,000Alabamafamilies claim about $1 billion through the Earned Income Tax Credit each year. Tax preparation and refund anticipation loan expenses cost those households $77 million.
• The Earned Income Tax Credit is a refundable tax credit for low- to moderate-income working families to offset the burden of payroll taxes.
