Get your taxes done for free and claim a refund!

Our tax system is difficult and challenging.  Many people get confused when they try to fill out their own taxes.  Going to a public service, such as H&R Block, Jackson Hewitt or Liberty Tax Service can cost $200-$300 or more.  While I am convinced that most of the times, these services earn every dollar.  On the other hand, some people just cannot afford this kind of expense.

Many people in the lowest of the income brackets, who may not be required to file their taxes because their income is too low, do not.  Or they do, but fail to take advantage of one of the best income tax breaks available, especially for lower income families raising children:  the earned income tax credit.

Fortunately, there are several ways that our lower income friends and neighbors can get their income taxes done for free!  The federal government has cobbled together a collection of volunteer agencies who will do your income taxes for free if your adjusted gross income is below a certain limit.  The program is called Volunteer Income Tax Assistance.

The income limit for this free program varies by agency but it (typically about $50,000.  These tax preparers are trained to fill out your income taxes the right way, and their work is double-checked by other trained experts.  The group that I volunteer with is called Tax Help Colorado, and they have helped lower income Coloradans get well over $150 million in income tax refunds back.  Their leadership report that the earned income tax credit is the single biggest credit that they see.

The earned income tax credit (EITC for short) is a credit on the income taxes for lower class tax filers with earned income.  Since it is a “credit” (not a “deduction”) this means that you can get money back from the government even if you do not owe taxes.  In other words, you might find that the government owes you money instead of the other way around.  It is especially designed for families with children, but it also applies to single individuals and married couples. The table below is used to determine eligibility and maximum credit you can claim.

Earned Income Tax Credit Limits

As you can see, the tax credit can be quite large, $6,557 for a family with three children.  For families scraping to make ends meet, this can make quite a difference.

It is very important that the documentation for the earned income tax credit be correctly filled out.  For example, you cannot claim a child that is also claimed by someone else, the child’s social security number must be correct, and so forth.  If you do not file this claim properly, not only will you be denied, but you must also file even more paperwork (IRS Form 8332) if you want to claim the credit in future year.  This is all the more reason to have a trained expert prepare the paperwork for you.

The VITA website can direct you to tax preparation volunteer organizations in your area.  Contact these organizations to find out where to get your taxes prepared for free.  Or if you wish, you can volunteer using this website as well.

When you go to a income tax preparation site, be sure to bring:

•        All relevant income tax forms (W-2s, 1099-R, SSA-1099, etc.).
•        Any notifications from the IRS, such as a notification of identify theft.
•        A copy of your social security card or letter from the social security administration proving your number.  (These volunteers will also do taxes for resident aliens with ITIN numbers instead of social security numbers.)
•       The name, ages, birthdates, relationships and social security numbers (or ITIN numbers) for all persons living in the same house as you.
•       A driver’s license or state identification card for identification purposes.
•       A copy of a cancelled check or other bank routing and account number information if you want your refund electronically deposited into your account.

The tax preparation process has three steps.

The first step is intake.  Here, you will fill out a questionnaire, together with the information provided above, and a tax volunteer will go over this information with you.  This review process makes sure that the information is complete and that the income tax site can handle your tax returns.  Even if they can handle your return, there may be some aspects of your taxes that are more advanced.  The intake coordinator can help ensure that your taxes are handled by a person trained and certified to meet your tax preparations need.  Some of the more complicated returns can be beyond the scope of the volunteer organization. 

The second step is the actual tax preparation.  You will sit down with a trained and certified income tax volunteer who will do your taxes for you.  Usually, you will sit side by side near a large computer monitor, so you can see what he or she is doing.  You should watch what he does.  Even though the preparer has been certified, it does not mean he makes no mistakes!

The third and final step is the quality review.  Here the work of the first preparer is checked by a second preparer to ensure that no mistakes were made.  The quality reviewer will also go over your income taxes to make sure that you understand what has been entered and why.  The tax forms are then printed as a record for you to keep.  If you choose to mail in your taxes, you will get a copy with mailing instructions.  If you choose direct deposit, a volunteer will e-file them for you, after you sign a few simple forms.

The large majority of those who use charities associated with VITA to do their taxes get large refunds.  The personnel who prepare the taxes are IRS certified.  The process is free and easy, only requiring you to collect your documents and visit a nearby school or church or charity for an hour or two.  It’s a great deal and I highly recommend it for those who qualify (as noted earlier, income must be no more than $50-$55K, typically).