Helping Parents Prepare for Tax Season and Build Their Savings
Anand Sharma: Once again, welcome and good afternoon to everyone joining us here for the latest installment of the Building Foundations for Economic Mobility webinar series. As always, this series is brought to you by the National Center on Parent, Family, and Community Engagement which, as many of you know, is one of the federal resources for early childhood programs such as Head Start and Early Head Start. So we are very excited to have you. I am you host, Anand Sharma. And today, we'll be talking a little bit about tax time and some of the opportunities there for families. But before we get to that, I wanted to say a little bit about economic mobility. Now those of you who have been with us know what this is all about, but I thought it would be helpful to just say a little bit about what we're getting at with this webinar series. So there are really two objectives for economic mobility. The first is thinking about increasing income and financial capabilities of families and the second is improving employment and education opportunities and career pathways. And the basic idea underneath all of this is that if you increase the skills, education, and financial stability of families, you not only help the parents but you also lead to better outcomes for the children.
And those of you in this audience don't need a hard sell about that, you believe in the Two-Generation Approach in working both with children and families, so I think all of this makes sense to you. But if we did have new folks joining, I just wanted to kind of set that context. Now for today's particular conversation, we'll be really focusing on that first objective, increasing income and financial capability and the specific topic is helping parents prepare for tax season and build their savings. Now tax season provides many Head Start and Early Head Start families with an important opportunity to jumpstart their planning for the year ahead, and working families can take advantage of a number of tax credits that can help them get back money and maximize their tax refunds.
And in collaboration with partners, programs like Head Start and Early Head Start can work with tax preparation organizations, one of which we'll here from today, to really connect families with resources that can help them find ways, low cost or free ways to file their taxes and also make sure they're taking advantage of all of the benefits that they might be eligible for. So in today's conversation, we'll be sure to share with you some tools and resources that you all in Head Start and Early Head Start programs can use to help families, make sure that they are accessing all of these tax credits and other things that they're eligible for, and also considering the possibility of saving some money if possible for future expenses and goals that they might have. So in terms of what we'll be doing today, first off we'll be getting a lay of the land from one of our colleagues from the federal government who will kind of talk to us about why tax time is such an important opportunity. And then we're also lucky to be joined by a colleague who is representing a tax preparation organization, although, as she'll describe, they do a whole lot more in terms of supporting families. And they will be able to say a little bit more about some of the concrete things that folks who are working with families can do to help those families access resources that are likely available in your community. So without further ado, we'll get to the program for today.
But I did want to mention one thing, we will be taking questions via chat throughout this session, and we're hoping to save a significant amount of time at the end for Q&A with both of our presenters. So as questions pop up, please feel free to share them, and I really wanted to thank everyone that joined in for sharing with our icebreaker question, we'll come back to those responses in a little bit. But I think in terms of the actual setup for the platform you're looking at, there are a number of resources on the screen, so I just wanted to draw your attention to that. One, the webinar resources, you can click on that, and then click on the download file button to access a list of resources, many of which will be discussed by our presenters today. And you can also click on the "More BFEM Webinars," part of the pane, and then click the "Browse To" button, and that will help you sign up for my peers and other information about BFEM, and we'll give another reminder for that at the end of the webinar.
So with all of our housekeeping out of the way, I'm very excited to introduce our first speaker Dave Sieminski. Dave is a policy analyst in the Office of Financial Empowerment at the Consumer Financial Protection Bureau and is currently the lead staff for the CFPB savings initiative, including the Tax Time Savings Program. Now before joining CFPB, Dave spent 15 years working in the asset building field in Seattle, Washington, and there he helped to start and managed a county-wide individual development account program, a large scale free tax preparation and Earned Income Tax Credit campaign and a non-profit affiliated with low income community development credit union. There is a lot more that I could say about Dave and the great work that he's doing with colleagues over at CFPB. But I would let Dave speak for himself. And with that, I will turn things over to you, Dave. Dave Sieminski: Thanks so much for inviting me today. I'm thrilled to be with you all to spend a little time talking about one of my favorite topics in the world, and that's saving a tax time. Before I start on that particular topic though, let me back up for a second and say just a couple words about the CFPB. So I think many people know but not everybody that the Consumer Financial Protection Bureau was created in 2010 through the passage of the Dodd-Frank Wall Street Reform act, so that's a piece of federal legislation that was passed in response to sort of the financial meltdown that we had in 2007 and 2008. And the CFPB is an independent federal agency built to protect consumers.
So we have the authority to ride it, enforce rules that keep banks and financial companies operating fairly. We also educate and empower consumers, helping them to make more informed choices to achieve their financial goals, and I think I really want to emphasize that second part because, as Anand was saying in the introduction, building the financial capability and the knowledge that people have to navigate the financial system, to have good information about what's available to them, or at least to know where to get the information they need to make good financial choices is actually, I think, one of the most important parts of the work that we do because if people were able to make good financial choices in the marketplace, then that reduces our need to be an enforcer and we can act in a more affirmative way to empower consumers.
And so that's part of the work that I do here along with many of my great colleagues, and I'm thrilled to be a part of the bureau. So let's talk about the topic, what is the tax time moment, or as some would say the tax time money moment? It's a unique time each year when consumers are required, by law, to file their tax return. Virtually, everybody is required to file a tax return unless you have very little income. But they also have an opportunity to think about their financial situation. And if they're receiving a refund, to make some decisions that could pay dividends in the future.
As Anand referred to in my introduction, for many years before I came to the bureau, I was in Seattle, Washington, and I helped to start and run a free tax campaign, not unlike the one that Kori is gonna talk about later in this webinar. But one of the things that I heard from so many consumers, and I've found hundreds of tax returns myself and supervised, you know, the preparation of tens of thousands of tax returns, but so many people will come and they will say, you know, "We hardly ever have time to reflect on what our financial situation is in total. We think about it from day to day or week to week, paycheck to paycheck, but we don't have time to think about, you know, what's happened over the course of the past here and what could happen in the future." So this is a unique opportunity for a lot of folks. But all that having been said, tax time can also be a really stressful time because it's very high stakes for a lot families because, you know, in some cases, they may actually owe taxes, and that's always scary to think about. But they also, they may be getting a refund. And if they're getting a refund, they don't know how much they're gonna get, what they're gonna do with it, they're thinking about that constantly. And so it's kind of a stressful time.
And also, you know, while most tax preparers whether they're in the commercial tax preparation industry or in voluntary income tax assistance programs, don't provide financial advice. They're not equipped to be financial advisors like CPAs, but they do at least have an open set of ears and willingness to talk to people about their finances. And I think that helps to sort of make that conversation really meaningful to consumers when they're thinking about their taxes and their finances. So a couple of other things to know about tax time, 75% of all tax filers and 85% of all filers with incomes below $50,000 a year receive a tax refund. So that's a vast majority of consumers, and many people just get a refund of over withholding, but, you know, for people with lower incomes, who have earned income during the past year and who have dependents, they may be eligible for additional tax credits or benefits like the Earned Income Tax Credit and the Child Tax credit. And a large percentage of lower income consumers also have very little or no savings. And tax time is a unique opportunity for them to consider saving a portion of their refund to achieve some of their financial goals.
And we think saving is so important because having no savings is a really precarious position for people to be in, especially if some emergency confronts them later in the year. So why does tax time matter for Head Start and Early Head Start families? Well, Head Start families are, by definition, low income, and they have children, and thus, they may be eligible for tax credits such as the EITC — Briefly before that could come to mean a refund of several thousand dollars. So the EITC is a refundable tax credit, meaning that it can do two things, it can reduce the amount of money that you may owe, if you owe taxes, or it can increase the amount that you receive in your refunds substantially. So let's say, for example, somebody had $1,000 of money over withheld during the course of the year, so when they file tax return, they would get that $1,000 back. But say, for example, in a family that has income, say, of $15,000 a year and may be they have got three kids or more kids, they could be getting an additional refund of $5,000 or $6,000. So they're getting a lump sum of money that, for most people that are in that situation, is the biggest single check that they're gonna receive all year. And so that's a big decision point for them and a big opportunity but also sort of can be a little scary to think about as well. So another thing to know is over 50% of all tax filers and nearly 60% of low income tax filers seek professional help to file their return. And again, when you think about the fact that this is a stressful time and people don't feel confident about filing their taxes themselves, a lot of people seek professional assistance and understandably so.
So one of the things to know about — If people seek tax preparation assistance to a commercial preparer, say H&R Block or Jackson Hewitt or Liberty or some others in that space, they're gonna be paying for those services, and the amount that they pay is gonna reduce the amount that they can receive in a refund. And also, consumers should be aware that a lot of commercial tax preparers when they're preparing your taxes, they all also offer you other ways of receiving either forgoing the cost of the tax services that they are providing until you get your refund or accelerating the receipt of some portion of your refund quicker than the IRS can get it to you. And what people need to know is when they take advantage of those services, they may seem to be convenient, and they are to a degree, but they also are costly.
So again, those are the kinds of additional services that are gonna reduce the amount that people get in their refund. And so people just really need to be aware of that and make a good financial decision about whether they want to spend the extra money for those services. So another thing to know is that about 3% of all tax filers have their returns prepared at a community volunteered income tax assistance locations like the ones in Austin and Dallas that Kori is gonna be talking about in a few minutes. VITA programs are free and in many cases, like foundations communities, where Kori comes from, they provide additional wraparound financial and social services that may be beneficial for families struggling to get by financially, which may include many Head Start families. And I also should mention that another 3% of tax filers annually file the returns using free tax preparation software that is accessible through something called the Free File Alliance, and there's gonna be links to some of these resources at the end of this presentation. And this is a free service, it's available to people that have incomes below $64,000 a year and feel comfortable filing their own tax return. So how does CFPB support consumers to make the most of their tax time moment? So one of the many educational strategies that CFPB employs is to help consumers maximize the benefit of the financial resources they have available, including making the most of their tax refund. So we actually have a mandate to provide opportunities to save while filing for the Earned Income Tax Credit and other federal benefits, that's actually written into the
Dodd-Frank law that enabled or that created the bureau. So we believe tax time is a unique moment for many tax filers with low incomes to save because many consumers have little or no savings, as I've already mentioned, and they have nothing to fall back on if they experience a financial emergency during the course of the year. The car breaks down, they miss several days of work, they have medical expense. Even a small amount of savings can make a real difference in people's lives because if they don't have those savings and an emergency occurs, then they're gonna end up either not being able to pay for it or they're going to have to go out and borrow money say from the payday lender or someplace like that, but it's gonna cost them a lot more money just to get access, just to solve their immediate problem. Also, the tax refund, especially for people who are receiving the EITC, provides the unique opportunity to set aside some funds in savings that may not be possible when you're living paycheck to paycheck. On a week to week basis, they don't have the money to save, but this is a unique opportunity. And also, savings while filing your return can be easy and automatic. And that's something that a lot of people don't have access to too is the ability to automatically save. So when you're filing your tax return, the IRS provides a facility so that you can actually divide your refund into three separate pots.
So, for example, say you want to put — You're getting a refund of $3,000 and you want to put $2,000 into your checking account 'cause you've got immediate expenses to pay for, you could then stick another $500 in your savings accounts, and you could stick another $500 into a saving bond — Excuse me, into saving bond or for a child's savings account or something like that. But there's a way that you can divide the money while you're filing your tax return and the IRS automatically distributes the funds to where you tell it that you want the money sent. So it's an easy and convenient way to automatically save. So the CFPB provides a variety of promotional materials to encourage saving at tax time, including posters and flyers and informational materials for consumers and also for providers of tax preparation services, including things like checklists, what to bring to your tax appointment if you're planning to save, and easy ways to save a portion of your refund. In 2018, the coming tax season which is about to start in just a month or so, the CFPB is providing training, technical assistance, and promotional materials to 70 VITA programs around the country, in 33 states, and in 2017, those same VITA programs served about a half a million tax customers. So we're excited to be working with the VITA community, to encouraging people to save and providing tools and resources for free-tax preparations programs around the country, to help people save and to build their financial stability, capability, and resiliency. So with that, let's see, just a couple other things that you should be aware of.
One is because of some new tax law, relatively new tax law, any refunds that contain any portion of the Earned Income Tax Credit or child tax credit will not be IRS prohibited from starting to pay out those refunds until at least February 15th. Now that may not matter for some people but for people who are used to filing early in the tax season, right when the tax season opens, usually about the middle of the month, that may cause a little bit of delay in receipt of their refund. And if they're used to getting it in just two weeks or something like that, then it's going to be a little slower than they normally would experience.
Also, another thing to be aware of is the incidence of tax fraud is increasing. And so the IRS recommends that you file your returns early and you make sure that you don't let anybody get access to your information, either your tax information, your ID information because we really want to make sure that people don't get ripped off and so does the IRS want to make sure that people don't get ripped off by having their tax returns filed fraudulently and that they make sure they get all the money that they have earned through the tax process. And the last thing I want to say, and this is something to flag because I know it's like on people's minds, you know that there's a bill currently going through Congress that would form the tax system, whatever you think about the content of that bill, one thing you want to know is that it will not affect the experience that people have in filing their tax returns for this coming tax season because they're filing it for 2017. What will happen, staring next year, assuming that the tax bill goes in for law is that people will want to start rethinking about how much they have withheld out of their paychecks and really paying attention to things so that they don't get a surprise in terms of more money that they may owe or more money that they're getting back when they file their return in 2019. So with that, I'll stop and I'll pass the ball back to Anand.
Anand: Thank you so much, Dave, I really appreciate you kind of giving us a lay of the land and giving us a nice introduction to some of the basics about this opportunity during this tax time moment. So just wanted to, you know, acknowledge that some folks were able to share at the start of the webinar, some of their — You know, different ways that they've seen families or that they themselves have used some of their tax refunds when they've received one, and some folks mentioned things like paying forward their rent or trying to buy a new vehicle, covering medical bills, paying off credit card debts, and someone mentioned being able to use it to save for emergencies and opening a child savings account for the future, and that speaks to some of the, you know, opportunities that Dave mentioned when families are able to save some.
But I do think it also kind of shows the range of issues that families are facing and that sometimes it's very appealing to be able to use that money to just cover immediate needs or, you know, bills and things that families have already accumulated and the prospects of saving can be really, really tough, and we'll talk a little bit of more about that in this session. So just wanted to thank, again, everyone who shared with that icebreaker, would also encourage people to raise any questions that you have based on what Dave already presented. He went pretty quickly and covered a lot of pretty complicated information. So we are more than happy to use a little bit of time at the end of the webinar to, you know, clarify what Dave may have said or go a little further than he was able to in his opening remark. So throughout the presentation, please share questions in the chat function. And with that, we want to move forward with our poll. And we wanted to ask all of you if your Head Start or Early Head Start programs are already partnering with tax preparation services, and we know that some of you may have partnerships with community organizations that do tax preparation, some of you may be making referral to such programs, some of you may not know whether or not your programs are offering or referring to those types of services.
So we just wanted to give you a chance to answer this on-screen poll and let us know, does your program currently offer tax prep services. And there is no right or wrong answer, it's just helpful for us to get a sense of where all of you are at in terms of connecting families that you partner with to these services. So don't be shy, the answers I'm not sure or no, that's totally fine. We'll have some really helpful resources to help you develop those partnerships if your program is interested in doing that. It looks like a significant proportion is offering some of these services in-house or have a community partner that you're referring to or are connecting families in some other way. And then there is maybe close to 40% who know they're not providing those types of services. So I would encourage those of you who are providing these services to listen to our next presentation closely and share any questions or even suggestions that you have about how you've been able to develop those partnerships or, you know, referral processes. And if folks don't have those prep services available to families in your program, ask questions in the general chat about what it takes to kind of set that up, and we'll be covering that a little bit more in our second presentation.
And with that, we'll switch out of this poll and introduce our second guest. We are very, very excited to have Kori Hattemer joining us today. As Dave was kind of previewing, Kori is director of Financial Programs at Foundation Communities. And in that role, Kori oversees a free tax preparation program, college support services, financial coaching, and savings programs. We'll be focusing on the free tax preparation program in today's presentation with those of who are part of the BFEM community and interested in the webinar we've been putting on, you know, a lot of the other things that Kori does cover things that are of interest, so maybe we'll have to have her back and talk about some of those things. Before she joined Foundation Communities, Kori was an associate director at Savings and Financial Capability at Prosperity Now. And many folks on this webinar may remember that organization under its former name CFED. And Kori completed both undergraduate and graduate work at the University of Texas at Austin. So we are very excited to have Kori joining us and bringing that tax program perspective. And with that, I'll hand things over to you, Kori.
Kori Hattemer: Great. Thanks so much. And hi, everyone. I'm really excited to join up today, and I want to thank the National Center on Parent, Family, And Community Engagement for the invitation to join you all. I hope that some of the information I share today is helpful as you think about how to support the families in your Head Start and Early Head Start programs this tax season. So to give you a little bit of background about me and kind of our program, I work for Foundation Communities in Austin, Texas. Foundation Communities is primarily an affordable housing provider. We have 22 properties across Austin and in North Texas that house more than thousands of individuals and families. But in addition to housing properties, we own and operate two community financial centers in Austin. And at these centers, we provide a range of free financial services to any households who earn less than $55,000 a year. For the largest of these financial programs is our tax program. Each year we prepare more than 20, 000 tax returns that bring back more than $34 million to our community, and on average, every return we prepare results in a refund of around $2,000. And in addition to our tax program, we actually provide a range of college support services at our college hub to help students get into college.
We also provide health insurance enrollment support, and one-on-one financial coaching to help people set and reach their financial goals. In addition to our work in Austin, we have a large tax preparation program in Dallas as well. But I'm gonna focus on our Austin services today since that's the work that I primarily do. Thinking about the 2018 tax season, I have three tips that I would share for how to help the families that you're working with increase their financial stability. So first, on just starting the conversation. Second, promoting the Earned Income Tax Credit and Child Tax Credit that Dave mentioned earlier. And third, sharing Free Tax Preparation resources. So thinking about starting the conversation, many of us feel uncomfortable talking about money, it's an awkward topic and can get really personal. I want to encourage all of you to remember that you don't need to dig into the details of people's financial lives to start a conversation about taxes. You don't need to be an expert in tax law or personal finance.
And so I'd recommend asking a few general questions to initiate a conversation on how families kind of think through what they might — what resources they might take advantage of during the tax season and how they might take advantage of the tax time moment. So maybe asking them how they prepared their taxes last year, did they pay someone to prepare their taxes last year, so that's an opening to talk about free tax preparation resources that I'll talk about in a minute. You can also ask if they know how they're gonna use their tax refund this year. And if not, maybe talking through some of the personal goals they might have mentioned already. I love the list that you all shared before we started around, you know, people might use their refund or used them in the past on car repair, buying a car, going on vacation, paying rents, establishing saving, and a range of other things, and so just talking with people around how they might use their refund and what's really gonna serve them and their family back. So second, we really emphasize making sure that families know that they may be eligible to receive tax credits. A lot of families who are eligible for tax credits don't file their taxes or don't claim these credits, and so they leave them on the table. The two tax credits that low income families are most likely to receive are the Earned Income Tax Credit or EITC and the Child Tax Credit or CTC. For families' kids, this year the EITC can range from $3,400 for families with one child to $6,318 for a family of three or more. So if eligible families don't file their taxes, then they're leaving this money unclaimed. Under the Child Tax Credit, low income families may also be eligible to receive up to $1,000 per dependent child under age 17. For both of these families, for both of these tax credits, families must have earned income in 2017, and their income must fall within a certain range. For example, unmarried couple with two children must have earned less than $50,597 in 2017 to qualify for the EITC.
And you certainly don't need to remember these range and need to know this, I just wanted to give you all a sense, if you're not familiar with it, of what kind of tax credit families can expect to receive and kind of what the eligibility criteria generally look like. Dave mentioned the refund already in his remarks, but I just want to reiterate that starting the past tax season, I've began delaying refunds for tax payers to claim the EITC. That is it required to wait to issue these refund until at least mid February.
The past year, the families who claimed that tax credit began receiving their refunds the last week of February. But it's really important to tell families that they should still file their taxes as soon as possible, as the earlier they file, the sooner they'll receive their refund. Also, it's important that families know that no one can get the refund for them any sooner, and so that it's required to hold these refunds and there isn't a pay preparer or some other organization that can get those resources for families' children. For families to really rely on getting refund or getting these credits early on, we recommend talking with them about what they might do to cover those expenses in the interim so that they don't end up taking out costly anticipation loans or other sorts of predatory loans that can be really high cost. If you really want to learn more about either of the credits I mentioned, I recommend going to IRS.gov or www.EITCOutreach.org, which I know and I've been sharing in the chat feature. So my third tip and final one for this tax season, I really, strongly recommend sharing free tax prep resources. Any amount that families pay to get their tax return prepared is money that they don't get in their refund. And so we want to make sure that as many people as possible take advantage of the free resources that are available.
The two resources that I'm gonna talk about are Volunteer Income Tax Assistance Programs or VITA, which I was excited to see many of you are already partnering with, and the second one is MyFreeTaxes. So our program at Foundation Communities is a VITA program. VITA is funded by the IRS and sites generally serve households who earn less than $55,000 per year. At these VITA sites, IRS-certified volunteers prepare tax returns for families at no cost and they're trained at our sites to help families claim all the credits for which they're eligible. You can view the link on your screen, IRS.treasury.gov/freetaxprep to find a VITA program near you. For any families don't meet this income cutoff or who prefer to prepare their own taxes, we refer people to MyFreeTaxes, which is free for households that earn less than $64, 000 per year. You can access this resource at MyFreeTaxes.org. And I also recommend the resource that David shared on free file resources. So beyond the 2018 tax season, for any of you who aren't currently working with VITA sites, I recommend kind of looking into what options you want to have for the 2019 tax season.
I think if you've got some time maybe, you know, finding out what your families might need to help them prepare their taxes and claim all the tax credits they may be eligible for, so do they need a resource that's gonna be on site, they need something with a very short wait time, and when you meet with a VITA program to figure out what partnership opportunities might be available, talking with them about what the needs of your families are so that they can be as flexible and accommodating as possible. At Foundation Communities, we rely on a number of partners to provide our tax program each year. So in 2018, we're gonna provide free tax preparation services at seven sites, so that includes our two community financial centers along with five community partner sites. So those include two community health centers, a public library, an Asian-America resource center, and youth services organization. And VITA programs across the country are really creative where they offer their services and who they partner with. So odds are there would be a location close to you if there's a VITA program in your city. We started planning for the 2018 tax season this past summer, so I recommend reaching out to your VITA program as early as possible.
They will probably be too busy to meet from January to April, but if you reach out in May, they should be pretty receptive. I really recommend just going to a location. And if that works for your site and your families, we really enjoy our partnership with organizations who are able to take our VITA services to their clients and really meet them where they are in that moment. We also offer a drop-off program that a lot of different VITA program offer. And so this is a virtual option where families drop off their tax documents and complete the intake forms that then we return. We prepare their returns offsite and call them when the return is ready, usually within three to five business days. So this is a great option for families to not be able to find childcare and really don't have time to sit and wait in waiting rooms waiting for their tax returns to be prepared. If co-location or drop-offs aren't good options for you, I recommend creating a really strong referral process with your local VITA partner.
I saw that many of you are having your local VITA partner come in and present to your staff or share information with families, and I think that's a great idea. Some of the key information we always want organizations to share are what the eligibility criteria are, what documents families need to bring, so they don't show up at the tax site unprepared, what the hours and locations may be 'cause they vary pretty broadly, and then any other transportation or other information they might need to access these VITA sites as easily as possible. With that, I'll turn it back over to Anand so he can facilitate Q&A, and I'm excited to answer any questions you all have.
Anand: Thank you so much, Kori. It was really helpful to hear some of the tips that you have and things that people in the Head Start and Early Head Start programs can do right now to be able to make sure their families are aware of some of these really, really important benefits and then also some things they can do as they're looking to the future, to 2019 to be able to set up partnerships with organizations like yours that are doing this work. So as Kori said, we are moving into our question and answer session. This is really your webinar, your opportunity to access Dave and Kori, our experts for today. So I'd encourage you to throw in your questions into the general chat. Some of you have already done that, and we will start again in just a moment. But we will take those as they come in and pretty much use the rest of this webinar to dig deeper. So if there is a burning question that you have or something that you, you know, like repeated or covered in a little more detail, just let us know. But we'll get things started here. So, Dave, first off, I wanted to kind of get your thoughts on some of the answers that we had to our icebreaker activity, which, you know, was asking folks what types of things people do with their tax refunds. And you heard a lot about covering, you know, emergency expenses and just paying bills that are, you know, already due or about to be due and then some folks trying at least save part of that for the future. Now I would just love to hear a little bit about what the research says about how tax payers generally use their tax refunds.
Dave: So yeah, thanks for that questions. Actually, there's been a fair amount of comprehensive research primarily done out of the Center for Social Development at Washington University in St. Louis that have been doing basically five years worth of research to study consumer behavior around the tax time moment. And one of the things they found that even though there is not a lot of — A lot of times, people don't formally save into a separate account. If you ask them how they think about what they're gonna do with their refund, basically, it comes down to — People will say, on average, that about a third of it is gonna go to current expenses, just literally things that they need to pay for today, tomorrow, next week. About a third is gonna go to paying down debt and a lot of people have, you know, a fair amount of debt, and about a third is going to savings. So, you know, those are not perfect numbers, but they are close and they are really revealing because people will not necessarily always stick that saving money into a separate account, but what they will do is they will mentally sort of set it aside in their checking account. So if they're getting a $1,500 refund, they may say, "That $500 that I'm thinking about, that I really want to hang on to is something I'm not gonna spend unless I absolutely have to." And that really is, that's saving behavior even if it doesn't show up as a formal act of saving in a separate account.
Anand: Thank you, Dave. We were getting a bunch of questions about the details of the Earned Income Tax Credit and Child Tax Credit. So Kori, I'll throw some of theses your way. But, Dave, feel free to jump in at any point if you think you'd like to add. So one thing people are asking. Here's a question from Juliana Sprague: "Are the Earned Income Tax Credit and Child Tax Credit just for low income families?" And, Kori, maybe you could recap some of the info about who's eligible for those.
Kori: Sure. So I recommend checking out the IRS.gov for specifics, but there is an income tax for Earned Income Tax Credit. Considering that eligibility for Head Start is really focused on, you know, the federal poverty limits, I would guess that most of the families you serve are going to be eligible for both tax credits, and so you — I mean, I don't want to say — In case that does not happen, but odds are they would be eligible. There is a cap for the Earned Income Tax Credit, for example, you can only earn up to, you know, if you're a single person with one child, up to $39,000, for example, this year. And so it's primarily geared towards people with lower incomes.
Dave: Anand, could I add something to that? In the case of the EITC especially, there are some other conditions besides income that make you eligible or ineligible. So for example, both the child and the filing parent or guardian have to have social security numbers, whereas they can't have a filing status of married but filing separately. There are a few other rules that make it a little bit tricky, but, you know, as long families, you know, sort of meet the basic rules, and I think Kori can probably even say more about this, then they can be — And their income is below what Kori had referenced, then they're eligible for the EITC. And really the person who should help people figure out whether or not they're eligible is the tax preparer because everyone's situation is different and, you know, household site and composition and resident status can affect things, and so — Also, families, you know, it's a household income, and so making sure of your filing status in terms of whether you're filing married filing separately or married filing jointly like Dave mentioned can affect whether or not you're eligible for certain tax credits.
Anand: Great, thank you, and I do think it's worth reminding folks, you know, Kori pointed out in her presentation, you don't need to be a financial advisor. In fact, I would venture to guess that most of us on this call are not financial advisors, but the main point here is knowing enough about this and knowing that there are many, many families who are eligible for this money and leave it on the table each year. And as people working closely with families and then partnering with families in Head Start and Early Head Start settings, it's a great opportunity to just remind people or inform them that they may be eligible and that it's probably worth, you know, doing some digging whether that be researching online or, you know, connecting them with a tax preparer or someone who has some of that knowledge in your community. So we'll dig a little more deeply on these questions.
But again, I think for official information, we have a host of government or .gov website, including the IRS, that will give you the official word on these matters. And, you know, there are financial advisors and folks who can give families targeted advice, but the main takeaway here is just help families know that they may be eligible for these things and that it is an opportunity to consider saving some of the money that they may be receiving through a refund. So sticking a little bit longer on this question of the Earned Income Tax Credit and Child Tax Credit, there is a question from Robin Suarez. And, Dave, may be you could take this one, but "Are the EITC, meaning the earned Income Tax Credit and the Child Tax Credit automatic? Or are these things that families need to seek out? Are they options they need to seek out when they're filing their taxes?" So I guess a little bit more information about, you know, where exactly families can indicate that they would have to, you know, be wanting that credit or is it something that just based on their income when they filed it, you know, they'll be able to get those benefits.
Dave: So based on the eligibility that we talked about, the various things that we've already talked about in terms of characteristics income and, you know, whether you have children and how many children and things like that. If you go to a tax preparer, certainly, if you go to a voluntary income tax preparer like Kori, even if you go to commercial preparers and you meet some of those guidelines, they're going to ask you about and make sure, most assuredly find out if you're eligible and determine your eligibility for the EITC and for the Child Tax Credit. If you happen to prepare taxes on your own and you're using most commercial software, that software will effectively take into account your income and your filing status and also prompt you to say, you know, you may be eligible for the Earned Income Tax Credit and the Child Tax Credit. So as long as you're getting either professional assistance from the volunteer or even in the commercial industry or you're using quality tax preparation software, you're going to be prompted if you're eligible, in other ways that you may be eligible for the EITC or the Child Tax Credit.
Anand: Thanks, Dave.
Anand: And one more question about eligibility. This is coming Katrina Martin. "What about grandparents who are raising their grandchildren, could they claim the Child Tax Credit?"
Kori: This is Kori. So it depends on your filing status. And so if you are claiming that child as a dependent, that's what matters. It doesn't matter so much, you know, the specific relationship. If the dependent's under the age of 18 and then your tax preparer will have a process and a set of questions for figuring out whether or not someone qualifies as your dependent and if you can claim them on your return. And it has to do with how much income they earned and how much of their living expenses you paid versus they paid. But it comes down to dependent status. Dave, I don't know if you want to add anything to that.
Dave: No, I think, I mean, that's exactly right, yes.
Anand: And would that also apply then to the Earned Income Tax Credit?
Kori: Yeah, in terms on dependent status, yes. So children, for tax returns, it depends on — It's not so much the child so much as the dependent.
Anand: Thank you. That's a really important point. And, you know, we often say parents here is a short hand when we're talking about these types of programs, opportunities for Head Start. But I think we all know that parents can incorporate a lot of different folks in a child's life who are taking the responsibility for caring and nurturing them, so the clarification's really, really helpful. I'll just ask folks if they have additional question to keep them coming and we'll try to make it through a few more before we call it a day. Changing tack a little bit, Daniel Prince asked, "How would we find out about drop-off or virtual options for tax preparation in our community?" And, Kori, I know you can't speak to every community that's represented here, but is there any kind of guidance you give folks about how they could find out about those types of tax preparation services in wherever it is they live?
Kori: Right, so we offer those options through our VITA program. And so I recommend using the VITA Locator tool. I think the link is in the webinar resources PDF. You'll get the contact information, telephone number, and address for the VITA program near you. I recommend calling them and asking them. There's a lot of variation in terms of what those options look like at different sites. And so I recommend directly calling the VITA program near you and asking them what that looks like and if they have it available.
Anand: And just once again, in case folks missed it when we started the presentation, VITA, V-I-T-A, stands for Volunteer Income Tax Assistance. And these are, you know, programs and services that are in many communities across the country. So we'd encourage you to take a look at the tool and see if there are things operating in your community because there is a good chance that there's something nearby. So, Kori, I wanted to ask you about what folks can do this year for connecting families to tax preparation and, you know, some tax advisory services. So I know you mentioned that you're laying the groundwork for the next tax year many months in advance. So if folks don't have those partnerships in place right now, and if I remember it correctly, maybe 40% of the folks on this webinar said that they didn't have either a partnership for preparation of taxes or some way of referring people, what are things that they might be able to do now or, you know, given that it's the holiday, right when the hit the ground running in the new year, what are the some of the most basic things that people in Head Start programs or more generally people who are working with families can do to try to help those families take advantage of these opportunities during the tax moment for this tax season?
Kori: Yeah, so I would recommend, as a first step, finding out if there is a VITA program near you. There isn't a VITA program in very city. So finding out if there is one, whether we co-locate or have worked with an organization before, we always are happy to come out and do presentations, drop off fliers, share whatever information people need so that they can send people to us. And so I don't think it's ever too late. I mean, earlier is better, but I don't think it's ever too late to reach out to your local VITA partner to figure out if they come do a presentation, if they have resources or fliers to share so that you can be prepared to share that information. And then if there isn't a VITA program near you, I would really recommend, you know, MyFreeTaxes, other free file resources if families feel comfortable doing that. If not, then it's a bigger conversation around what local resources would you trust. There aren't a lot of free tax preparation resources available and a lot of the paid preparers end up being really costly and don't tell you upfront how much it's going to cost.
Anand: Thank you, Kori. So we have a couple more questions about some specific eligibility. So one question that we got was from Melissa Palmer. And the question is, "Can a woman claim her live-in boyfriend as a dependent if he's not working but taking care of their small child during the day as opposed to putting the child in daycare?" So again, the question is can a woman claim her live-in boyfriend as a dependent if he's not working but takes care of their small child during the day as opposed to putting the child in daycare. And, yeah, I'm not sure if there's any information you'd be able to provide on that.
Kori: So this is, Kori, and Dave might have the answer as well, but I would say I'm not really comfortable providing that kind of advice, that's really a conversation I think between the taxpayer and the tax preparer in terms of what filing status makes the most sense, in terms of, you know, how to help with that status and who — Or, you know, married filing together, married filing separately, ask us some questions about that as well but also in terms of who they claim as dependents, what they're allowed to do but also what's most advantageous for them. I wouldn't recommend having those conversations with families, but I'd really differ it to tax preparers in terms of looking into the details of what they should include and who they should claim on their tax return. Dave, I don't know if you have specific insights or advice.
Dave: Yeah, I mean, I would concur completely with Kori. I mean, there's so many variables in that situation that, you know, to play them all out would be difficult. We really have to know the specifics. If I'm a tax preparer or Kori's a tax preparer, whoever, we really need to know the specifics and the entire living situation. You know, how much income, if any, the boyfriend had and a variety of other things before we can make a judgment about whether that's claimable or not.
Anand: Right. And I totally understand that. And we'd encourage folks again to, you know, refer to tax preparation professionals who could work with an individual family about their circumstances. So we're about to close things down in just another minute or two and start mentioning some of the resources that you can look into on your own. There was one more question and, you know, I understand if this is a similar kind of eligibility one that you can't comment on. But Felicia Roberts had asked if you're considered single if a spouse is incarcerated. And is that's something that, Dave or Kori, you could speak to? Kori, you might be better positioned than me for that since you're closer to the ground.
Kori: I actually don't know off the top of my head. It's really tricky in terms of — I mean, 'cause there are some rights you lose when you're incarcerated. I'm not sure off the top of my head. I'm sorry.
Anand: No, that's totally fine. And, you know, we can certainly try to look into that and see if we're able to find an answer. I will mention that we will have, at the end of this webinar, from 4:00 to 4:15, a chance to chat with our presenters. We'll end the webinar at 4:00 Eastern, but we'll stick around on the chat function to try to, you know, answer a few more questions and point people to resources.
Dave: And I will offer one thing regarding that last question. We have somebody in our office who specializes in issues related to incarceration. And so, if she happens to an answer and it's definitive, I can email it to you and we can see if we can get that out to the people who asked it.
Anand: Definitely, I really appreciate that, Dave. And I know everyone in the audience does as well. So we are going to end soon, but I wanted to give both Dave and Kori a chance to share any final thoughts they have about advice for folks who are in Head Start programs and working with families about how to take advantage of this tax time moment for savings. And I'll just share one thing as they're collecting their thoughts, which is just the importance of recognizing that you, as someone who's worked on families don't need to know the answers to all these questions. The biggest takeaway, and I can't stress this enough. And this just came through for me from Dave and Kori's presentation is that you just need to know that there is a huge opportunity for families to maximize their tax refunds and, you know, to consider saving some of that refund to support their long-term financial stability and economic mobility and that it is important for families to at least explore that. And you don't need to have any of those answers. You shouldn't be giving financial advice unless you happen to be a financial professional. And it's okay not to know, but just letting families know that there are lots of these benefits out there, many of which go unclaimed, is, you know, more than enough. And if you can connect them to someone that can prepare their taxes, like one of these VITA sites, that's, you know, a wonderful thing. But just sharing that information, and if you can, make it a referral, even if you don't have a formal partnership this year, that would be a huge step to, you know, helping those families obtaining some benefits that could be really, really important for them. So I will turn to Dave. And any kind of parting thought you'd like to share with folks?
Dave: So I'd obviously just echo what Anand just said but also to say that even if you don't have a formal partnership with a VITA program, but you happen to have one in your community. Many, many VITA providers have open doors for new customers to come in. And so, you know, the first thing, the key thing, is to find out whether one exists in your community. Contact them, find out whether they take appointments or whether they just have walk-in services, where their locations are, and make sure you focus on that first because, you know, to the extent you can get people free quality tax preparation services, it both makes sure that they're going to get all the benefits that they deserve and have earned through the tax system and also gives them an opportunity to sometimes get other services and also gives them an opportunity to think about saving a portion of their refund. So I would make that the first thing I do whenever you get an opportunity is to identify a free tax preparation provider in your community, and track them down, and see if you can get your clients or the people you work with the services that they provide.
Anand: Thanks, Dave. Kori, parting thoughts.
Kori: I don't think I have anything to add. I think everything I would have shared you both just shared. Just to reiterate, like I really don't recommend having like an in-depth conversation with someone about their filing status or filing situation. There are a lot of variables when I, you know, presented the information of the Earned Income Tax Credit and Child Tax Credit. There are other criteria and other consideration there. And so people aren't automatically eligible just because they meet, you know, the income cutoff or, you know, have kids with earned income. So I really strongly recommend sending someone to a certified tax preparer at a VITA site or, you know, direct them to online resources that can help guide them through the process versus trying to dig into the weeds of their tax return situation. But thanks for everything you all do and for allowing me to be a part of the webinar.
Anand: Thank you, Kori. So just quickly wanted to share some additional resources, many of these, all of these I believe, are on the webinar resource list that you download on the left side of your screen just by clicking on the resource and clicking the download file button. But the Consumer Financial Protection Bureau has a whole set of resources for tax preparation that you can check out at your leisure. There are also a number of tools including ones that can help you locate VITA sites that have been shared throughout the webinar, so I won't go through each of these. They are also on that resource list. And here's some additional tax time information websites that can help you connect with efforts in your communities to get the word out about all of these benefits and help people maximize their refunds and hopefully save a little. And just to close this out, we also wanted to give a final plug from MyPeers. This is a great place to continue the conversation between webinars. So we encourage you to join the Economic Mobility Learning Community. You can also click for registration information on the left side of your screen where it says more BFEM materials. You can click on registration from MyPeers, and then the browse to button, and that will take you to a link where you can sign up and join the Economic Mobility Learning Community.
There are many webinars. This is the 17th webinar, believe it or not. So we encourage you to relive your favorite past BFEM webinars or check out an archived version of this one that will be up in a couple of weeks complete with slides. And you can just use the link on your screen to do that. And last but certainly not the least, I want to thank Dave and Kori and all of you for joining us not only at this webinar but throughout the year. From all of us at the National Center on Parent, Family, and Community Engagement, we will send you the best, whatever you're celebrating, wherever you're going, we hope you have a wonderful time with friends, family, and loved ones. And we hope that your 2018 starts off happy, healthy, and on a road to prosperity. So thank you so much for joining us, and we look forward to seeing you in the New Year.
Learn more about the Earned Income Tax Credit (EITC). Find out how working families can use the EITC to receive a significant refund. Explore ways to partner with financial institutions and tax preparation organizations to encourage families to save some of these funds.