Volunteer tax preparers spread the word on earned income tax credit

When it comes to groups that fight poverty, the Internal Revenue Service doesn’t immediately come to mind. But the CEO of Alameda County’s First 5 program, which funds efforts to support families with young children, says the IRS provides an overlooked service to low-income families, boosting their incomes substantially with a tax credit.

“The earned income tax credit is arguably the largest and most important anti-poverty program in our nation,” CEO Mark Friedman said Friday during a press conference at a free tax preparation site in West Oakland. Funded partially by an IRS grant, the Mandela Gateway site prepares taxes and lets people know they are eligible for the credit.

The credit allows low-income families and individuals to keep more of their earnings; in 2011, the credit can be worth up to $5,751 in saved earnings, and the amount varies based on how many dependent children a person has. Sometimes the credit results in a sizable tax refund. Low-income taxpayers who don’t know they qualify can end up losing rent and grocery money to the IRS.

The credit can raise a family’s income significantly, according to Julia Garcia, who is the acting director of the IRS’s Customer Assistance, Relations, and Education program. She said Californians received an average of $2,100 in the 2009 tax year. This year, the maximum income to qualify for the credit went up over $49,000 per household from about $48,300 in the 2009 tax year. It’s Garcia’s mission to let as many people know about the tax credit as possible.

“We have to tell them,” Garcia said at Friday’s press conference. “Our challenge now is to find those one out of five workers who qualify,” but don’t know about it.

Low-income Oaklanders have quite a few options for free tax help. The United Way of the Bay Area, a recipient of the IRS’s grant, has free tax prep sites throughout Alameda County, and in the 2009 tax year, their Earn it! Keep it! Save it! program processed 15,937 tax returns. United Way reported that Alameda County residents received over $5.8 million in earned income tax credits, and over $17.7 million in total tax refunds.

United Way helps fund the site on Mandela Parkway where officials spoke on Friday, in a space provided and staffed by the People’s Federal Credit Union. Valerie Allums, an advisory board member for the credit union, has helped taxpayers prepare their returns since the site came to the Mandela Gateway housing project in 2005. “People are still afraid of the IRS,” Allums said.

And they might have good reason: Allums said peoples’ biggest concern is unpaid back taxes. “They come out of reaction, when the IRS is garnishing their wages,” Allums says.

Allums herself qualifies for the tax credit; the former social services worker said she was laid off in 2009 and underemployed in 2010. Allums counts herself lucky for knowing the system. While she was growing up in Richmond, her father, a tax preparer, disciplined Allums and her brother by making them prepare tax returns. Not everyone has a family background in tax prep, and Allums said she wants to help as many eligible people as possible.

Friedman, CEO of First 5, says children are important beneficiaries of the earned income tax credit. Many Alameda County families with children ages five and under face economic hardship, he said, and a boost to their incomes benefits young children.  Friedman said First 5 serves approximately 14,000 children in Alameda County, so the potential benefit of publicizing the tax credit could be great. “We’re trying to spread the word to everyone,” Friedman said.

Adults benefit from the credit too. Malika Alim, a member of the People’s Federal Credit Union, first accessed free tax prep in 2008. She said she wasn’t surprised to receive the earned income tax credit, and she was happy not to have to relinquish part of her refund to pay for tax preparation.

The credit union encourages taxpayers who receive help with their returns to deposit their refund in a savings account. Alim joined the credit union around the time she started using their tax service, and since then she has improved her credit rating and qualified for a car loan, something she hadn’t thought could happen. The ’98 Land Rover she drives today is the first vehicle Alim has bought with a loan.

“I put together a solid plan,” Alim said.

Sika Amados, who works with the national organization that runs the credit union, says the goal is to encourage people to start rebuilding their finances. Said Amados, “We say, ‘It doesn’t matter what’s in the past. Come to us.’”

Alameda County Residents can call 211 or visit earnitkeepitsaveit.org to find the nearest free tax assistance program. The People’s Federal Credit Union tax assistance site, located at 1350 Seventh Street in Oakland, will provide assistance Wednesdays and Thursday evenings from 5:30 to 8:30 pm, Fridays from 12:30 to 5:00 pm and Saturdays from 9:30 am to 2:30 pm.

Image: Malika Alim talks about the tax assistance and financial education that People’s Federal Credit Union and United Way have provided for her. United Way will help fund free tax return preparation at the Mandela Gateway building and other locations during tax season.