Objective
SaveFirst trains college, graduate, and law students to provide free tax preparation services and opportunities for savings and economic improvement to low-income, working families—especially targeting those eligible for an Earned Income Tax Credit refund.
SaveFirst Accomplishments
The third year of SaveFirst saw tremendous success in terms of student involvement and community members served. Over 400 trained students from more than ten campuses prepared tax returns for more than 2,600 families in twelve cities statewide: Birmingham, Montgomery, Mobile, Huntsville, Tuscaloosa, Bessemer, Gadsden, Tuskegee, Dothan, Decatur, Auburn, and Marion. In just six weeks, our statewide campus collaboration helped these working families secure more than $4.7 million in tax refunds, saving them over $670,000 in commercial tax preparation fees.
Program Components
Free Tax Preparation
Students attend a six-hour tax training session in early January during which they learn tax law concepts such as determining filing status and
dependency exemptions, how to report sources of income, and figuring the eligibility of tax credits. Students also become proficient in using a web-based tax software tool during the training. Following the training, all students must pass an IRS certification test. Once certified, students prepare taxes at community-based sites across the state beginning in mid-January.
Tax Training Program
Locations of Tax Prep Sites (including maps)
Poverty Course Development
Students enrolled in poverty service-learning courses discuss and reflect on issues such as perceptions and misperceptions of those living in poverty and current policies affecting working families. Through their direct service at SaveFirst sites located directly in communities of need, students then gain firsthand experience and the ability to think more critically about those issues introduced in the classroom.
Legislative Reform Agenda
A major effort that we launched during our third year was to organize all students participating in SaveFirst to work together to encourage the Alabama State Legislature to pass the Alabama Taxpayer Protection & Assistance Act to reform the commercial t
ax preparation industry. Basing our own model legislation upon statutes that states from around the country have enacted, this legislation would have provided oversight over the industry by requiring all commercial tax preparers to pass a minimum proficiency exam, obtain an annual license, and fulfill continuing education requirements. Utilizing hundreds of college students not only brought more attention to this important effort, it also inspired the students themselves to believe in the efficacy of collective action and to continue to work for structural changes to solve societal problems.
Update: The Alabama Taxpayer Protection & Assistance Act passed the Alabama Senate unanimously in late February 2009. Unfortunately, it stalled in the House and although came up for debate on the House Floor at the end of the session, did not come up for a vote. During the summer of 2009, the IRS Commissioner announced his intention to seek public opinion on this issue and to develop recommendations on how to reform the industry at a national level. A staff member from Impact Alabama presented our findings to the IRS Commissioner in Washington, DC, in September 2009, and we look forward to hearing the recommendations from the Commissioner in December 2009.
Legislative Agenda
Asset Building Opportunities
Assets create opportunities that mere income cannot—by fostering long-term thinking and behavior in both economic and social aspects of life. Eligible clients are given materials on and encouraged to consider investing in Individual Development Accounts. IDAs are matched savings accounts that allow eligible individuals to contribute up to $2,000 to be matched by local and federal funds $2 to $1 toward the purchase of a home, higher education, or development of a small business. SaveFirst has established partnerships with organizations statewide that offer matching funding for IDAs, and participating students can provide information to our clients to encourage them to make use of these innovative saving opportunities.
The Need for SaveFirst
Many low-income households are eligible for the EIC and other tax credits, but are unaware of their existence and thus do not apply for the annual refunds. The IRS estimates that 15% or more of EIC refunds are unclaimed by low-income families, which amounts to approximately $2.7 billion each year (The 2004 Just Money Project). Moreover,
many who do not have the resources or knowledge to file their own taxes instead rely on costly commercial tax preparers. Additionally, many consumers are convinced to take out a Refund Anticipation Loan (RAL) - a predatory one-to-two week loan secured by and repaid directly from the proceeds of a consumer’s tax refund, offered at exorbitantly high interest rates, ranging from about 50% to over 800% APR.
In Alabama, more than 490,000 families annually claim an estimated $1 billion through the federal EIC. However,
with more than 75% of EIC recipients in Alabama paying a commercial preparer to complete their taxes, Alabama families lose more than $78 million annually to tax preparation and refund anticipation loan costs – a figure which places us at 48th in the nation. That extra $78 million could have made a tremendous contribution to helping lower-income families secure health insurance, pay down debts or put food on the table.
Greater income alone is not necessarily the key for low-income families to escape poverty or find financial stability. Assets create opportunities that mere income cannot—by fostering long-term thinking and behavior in both economic and social aspects of life, and by enhancing the chances of success for children in the household. SaveFirst partners with local organizations that fund Individual Development Accounts. IDAs are matching savings accounts that permit eligible individuals to contribute up to $2,000 to be matched by local and federal funds $2 to $1 toward the purchase of a home, higher education, or development of a small business.
SaveFirst Partners
In just four years,
SaveFirst has grown into the largest and most successful volunteer tax preparation program in the state! SaveFirst is a collaborative effort among Impact Alabama, fifteen Alabama universities and colleges, thirteen cities, the Internal Revenue Service, and more than one hundred businesses, nonprofits, and community organizations throughout the state of Alabama. We are grateful to all of our community partners for the success of this effort. We are particularly excited about our major sponsor relationships with Regions Bank and FOX 6, both of which have been critical to the success of our third season.
We also wish to thank the State Farm Youth Advisory Board, our primary national sponsor, which has provided tremendous support to our efforts.
Goals for the Future
SaveFirst is growing faster and faster each year. In 2009-2010, we anticipate increasing the number of families served by 25% - serving more than 3,200 families, and developing an EIC/VITA outreach campaign with 100 business and nonprofit partners. In addition to continuing to operate twelve existing VITA sites, we will expand to Florence and Greensboro and establish a new Birmingham site in Woodlawn.
