Friday, January 16, 2009
By STEVE DOYLE
Times Staff Writer steve.doyle@htimes.com
Some poor people take costly loans; help can be free
A grandson of the late U.S. Supreme Court Justice Hugo Black is taking on tax preparation firms that he says prey onAlabama’s poorest residents.
Stephen Foster Black, who heads theUniversityofAlabama’s Center for Ethics & Social Responsibility, is pushing a bill that would require paid tax preparers to be licensed by the state and pass a proficiency exam.Alabamawould become just the fourth state to regulate the tax-preparation industry, joining Oregon, Maryland and California.
“To be a hairdresser in Alabama, an individual must complete certain training and obtain a license to do business,” Black told The Times’ editorial board Wednesday. “We should also expect Alabama’s tax preparers to have a basic level of competency and be accountable for their work.”
Seventy-six percent of Alabama families eligible for the federal Earned Income Tax Credit hire tax preparers to help them qualify for the program, Black said, even though free help is widely available.
The Earned Income Tax Credit is a federal antipoverty program to support working families with children earning less than $42,000 a year. While the average tax credit is about $2,300, many families take home far less after paying someone to fill out their tax returns and opting for a costly “refund anticipation loan,” Black said.
The 492,000 Alabamians who claim the credit collectively spend about $77 million a year on tax preparation fees and rapid refunds. Same- or next-day refunds offered by H&R Block and other commercial preparers are basically high-interest loans repaid with the proceeds from a customer’s tax refund, Black said.
A spokesman for Kansas City-based H&R Block did not return calls Thursday seeking comment.
Black said low-income families don’t have to shell out big bucks for tax preparation. A nonprofit group he founded, ImpactAlabama, is training college students to fill out income tax forms for free.
The program starts Tuesday atHuntsville’sUnited Wayoffice,701 Andrew Jackson Way. Students from theUniversityofAlabamainHuntsvilleand other colleges will work in pairs to prepare tax forms following IRS guidelines; each return is double-checked by an Impact Alabama supervisor before being filed.
The 1,400 Alabamians who used the free service last year saved more than $290,000 in tax preparation fees, and Black hopes to triple the savings this year.
He is less certain about the fate of the “Alabama Taxpayer Protection and Assistance Act.” The bill would create a state board to oversee paid tax preparers, who would have to pass a proficiency exam and attend classes to stay abreast of tax code changes.
Oregon has a similar law, and Black said the U.S. Government Accountability Office has deemed tax returns from there to be among the nation’s most accurate.
The same agency, in an April 2006 study, found mistakes on 89 percent of tax returns filed by paid preparers, he said.
State Rep. Tammy Irons, D-Florence, and state Sen. Quinton Ross Jr., D-Montgomery, have agreed to sponsor the bill. It also has the backing of Alabama Arise, an advocacy group for the poor.
While Black said he knows it’s a “terrible budget year” to ask for a new program, he said college students who believe in the idea plan to travel to the capital “in waves” to push for its passage.
“Politically, I don’t know, I think it’s a dice roll,” he said. “It would be a coup to get something like this passed the first year.”
