It is not too early to think about the upcoming tax season and ways that direct-care workers can get a bigger refund and keep more of their money at tax time.
Many direct-care workers may qualify for the earned income tax credit (EITC), a refundable tax credit designed for low- and moderate-income working individuals and families. The maximum 2009 EITC is $5,657, depending on family size and income. As many as 24 states have a state EITC that provides an additional credit on state taxes.
People who are eligible for the EITC can save even more money by avoiding paying commercial tax preparers. Instead, workers can have their taxes done for free at a volunteer income tax assistance (VITA) site. These sites are available in most communities across the country starting in mid to late January and are staffed by IRS trained and certified volunteers.
“When it comes to taxes, every dollar that someone does not spend on preparation fees is a dollar that can be put towards improving their future,” says Ross Yednock, director of the Asset Building Policy Project of the Community Economic Development Association of Michigan.
Another option is I-CAN! E-File, a free alternative to other on-line tax programs which is available to anyone, regardless of income. I-CAN! is easy to use, provides on-line support, and can help people become more comfortable with doing their own taxes — and taking charge of their finances.
Both VITA and I-CAN! are also an alternative to expensive “rapid refund” loans, getting people their refunds within 10 days at no cost.
“We want to increase the number of EITC-eligible filers who use free VITA tax sites or I-CAN, because too often they go to commercial tax preparers and pay as much as 30 percent of their EITC for a ‘rapid refund’ loan,” says Peter Ruark of the Michigan Statewide EITC Coalition and the Michigan League for Human Services.
As tempting as a “rapid refund” may be, they come at a cost. In addition to the fee that commercial providers charge to process “rapid refunds” the loans can come with interest rates as high as 200 percent.
PHI is helping to get the word out about EITC, VITA, and I-CAN! E-File through the Earn, Keep, Save MORE campaign. The Michigan campaign provides employers with information and tools to share with their staff and can answer workers’ questions about these services and programs. To find VITA sites in other states, contact the local United Way, or visit the IRS or State Treasury Department websites.
