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 second year of SaveFirst saw tremendous success in terms of student involvement and community members served. Over 260 trained students from twelve campuses prepared tax returns for more than 1,400 families in seven cities statewide: Birmingham, Montgomery, Mobile, Huntsville, Tuscaloosa, Decatur, and Auburn. In just six weeks, our statewide campus collaboration helped these working families secure more than $2.4 million in tax refunds, saving them over $290,000 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 from mid-January to mid-February.
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. Thus far, UA, UAB, and
Birmingham-Southern have implemented such courses on poverty.
Legislative Reform Agenda
SaveFirst goes to Montgomery in 2009! A new major effort that we are launching during
our third year is to organize all students participating in SaveFirst to work together to
encourage the Alabama
State Legislature to pass the
Alabama Individual Tax Preparers Act and reform
the commercial
tax preparation industry.
Basing our own model
legislation upon statutes
that several states from
around the country have
enacted, our legislation will provide oversight over the industry and support nonprofit free tax preparation efforts statewide. Utilizing hundreds of college students not only
brings more attention to this important effort, it also inspires the students themselves to
believe in the efficacy of collective action and to continue to work for structural changes
to solve societal problems.
Legislative Agenda
Join the SaveFirst Legislative Team!
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
The federal Earned Income Tax
Credit (EITC), established by
Congress in 1975 for low-wage,
working individuals and families,
is a refundable tax credit designed
to “make work pay.” The amount
of the credit is determined by the
annual earned income of individuals
and the number of family members.
The EITC is the largest federal
income subsidy program aimed at
helping the working poor and has
been extremely successful in lifting families and children away from poverty as well as
providing a positive incentive for individuals, especially single mothers, to find work.
Many low-income households are eligible for the EITC 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 EITC 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 EITC.
However,
with more than 75% of EITC 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
two years, SaveFirst is quickly growing into the largest and most successful volunteer
tax preparation program in the state! SaveFirst is a collaborative effort among Impact Alabama, twelve Alabama universities
and colleges, seven cities, the Internal Revenue Service, and more than fifty
businesses, churches, 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 to announce two new partnerships with Regions Bank and
FOX 6, both of which have been critical to the success of our second 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. We
plan to continue to increase
our student base of volunteer
tax preparers as well as
the number of families
served statewide. In 2009, we anticipate expanding to five new cities (Bessemer, Gadsden, Tuskegee, Dothan, and Marion) and five new campuses (Lawson State Community College, Gadsden State Community College, Tuskegee University, Wallace Community College-Dothan, and Judson College) and tripling the number of families served statewide by our tax preparation initiative—reaching 4,200 families across Alabama.
