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Coronavirus Making It Harder for Low-Income Taxpayers to File

March 19, 2020, 4:01 PM

Volunteer centers that help millions of low-income taxpayers each year are shuttering in response to the coronavirus pandemic, making it harder for those people to file their taxes and get the refunds they rely on.

The Treasury Department on Wednesday announced some virus-related relief for taxpayers, pushing back the deadline for individuals and corporations to pay taxes until July 15. But taxpayers still must meet the April 15 deadline for filing their tax returns.

Many low-income taxpayers rely on free in-person assistance to help them file and get the credits for which they are eligible. But that kind of help will be harder to find this tax season as in-person services are cut back to limit social contact.

The AARP Foundation’s Tax-Aide program, which helps 2.5 million low- and moderate-income people with their taxes each year, suspended services indefinitely on March 16. Many IRS Volunteer Income Tax Assistance (VITA) program sites—which offer tax prep help to low-income taxpayers, the disabled, and people who speak limited English—have also closed their doors.

“The VITA sites are dropping like flies,” said Jennifer Gardiner, low-income taxpayer clinic director and staff attorney at Legal Aid of Arkansas, which counsels low-wage taxpayers, helps them in dispute with the IRS, directs them to VITA centers, and has closed to client visits.

The IRS didn’t respond when asked whether it directed VITA sites to close, but sites in Los Angeles, Minnesota, Arizona have all cut off services due to the pandemic. The VITA program helped prepare around 1.5 million returns annually from 2014 to 2017, the most recent years for which data is available.

Documentation, Translation Needs

While many will be able to meet the April 15 deadline by filing online or sending copies of their financial records to their preparer, low-income taxpayers may find it difficult to file.

Some low-income taxpayers who rely on free tax services don’t speak English and need meetings with translators, a process that is difficult to conduct over the phone. Not all of the taxpayers that the centers serve have access to computers, fax machines, or phones, or the money to pay for copies that volunteers might otherwise make for free.

“If somebody’s not that good with a computer or doesn’t own a computer anyways, then trying to convince them to do their tax return, which can be complicated and prone to errors—that’s difficult,” Gardiner said. “Especially when you’re talking about self-employed people that have more complicated tax returns, they’re in trouble.”

The lack of in-person help will be especially challenging for people scraping together all the necessary documentation for their earned income tax credit refunds, said tax professionals who work with low-income individuals.

Low-income individuals depend on their earned income tax credit refunds, in addition to general annual tax refunds, and if they can’t get those on time, “that’s going to be huge,” said Ted Afield, who directs the Georgia State University College of Law’s low-income taxpayer clinic, which aids low-income taxpayers with IRS disputes.

Afield said there has been a general workflow lag at his clinic, as attorneys and students are working remotely, reviewing draft letters to the IRS over email chains rather than in the office.

Rush for Refunds

The closure of free tax prep sites comes as the Trump administration is exploring ways to stimulate the economy. Treasury Secretary Steven Mnuchin on Tuesday proposed a stimulus package that includes $500 billion to be spent on sending checks to Americans.

Mnuchin, during a Wednesday appearance on CNBC, also stressed that lots of people will get refunds when they file their 2019 tax returns.

Tax refunds are how low-wage Americans make some pretty basic payments, such as on loans and health care expenses, said Caroline Bruckner, managing director of American University’s Kogod Tax Policy Center, who volunteers at a Washington, D.C. VITA site that has shut its doors.

With a rush to file by April 15 and limited free help available, Bruckner and Afield both said they worry low-income people could be increasingly drawn to scammers and unscrupulous preparers who target that population.

“The only certainty that I have is vulnerable taxpayers will experience some harm that we haven’t thought of yet,” Afield said.

—With assistance from Jeff Leon and Allyson Versprille.

To contact the reporter on this story: Lydia O'Neal in Washington at loneal@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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