Saving Money with Self-Preparation of Income Taxes
We will leverage networks of Volunteer Income Tax Assistance (VITA) organizations and computer-based training to facilitate self-prepared, sustainable tax returns for low-income households.
About You
Location
Project Street Address
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Your idea
Year initiative/program began:
2008
Field of work
Other
If Field of Work is "Other" please define in 1-2 words below (and explain in detail in the entry form):
Service / Activity focus (If "other" please explain in entry form)
Delivery Method
Year organization founded (yyyy)
2000
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Positioning of your initiative on the Mosaic of Solutions™ diagram:
Which of these barriers is the primary focus of your work?
Lack of access to markets or products
Which of the principles is the primary focus of your work?
Lower the entry threshold
If you believe some other barrier or principle should be included in the mosaic, please describe it and how it would affect the positioning of your initiative in the mosaic
This field has not been completed. (333 words or less)
Name Your Project
Saving Money with Self-Preparation of Income Taxes
Describe Your Idea
We will leverage networks of Volunteer Income Tax Assistance (VITA) organizations and computer-based training to facilitate self-prepared, sustainable tax returns for low-income households.
Innovation
What is your signature innovation, your new idea, in one sentence?
We will leverage networks of Volunteer Income Tax Assistance (VITA) organizations and computer-based training to facilitate self-prepared, sustainable tax returns for low-income households.
Describe what makes your idea unique—different from all others in the field.
Each year, non-profit organizations help millions of low-income clients access the nation’s largest anti-poverty initiative, the Earned Income Tax Credit (EITC) and other important tax refunds. Unfortunately, millions more fall victim to tax preparation businesses promising “fast money” or “easy loans” and capturing these dollars in complex lending schemes with exorbitant percentage rates.
Last year, One Economy piloted a scalable program to leverage community-based organizations experienced in serving low-income households with a free online income tax self-preparation campaign. Breaking the mold of one-on-one return preparation, these community organizations oriented groups of up to twenty individuals in self-preparation of simple returns, teaching clients how to prepare and e-file their own federal and state income taxes. Participating organizations received software orientation, technical support and data on their participants’ activities to prove immediate community impact to funders, stakeholders and constituents alike. This program was provided at no cost to partners or the clients they referred.
How do you implement your innovation and apply it to the challenge/problem you are addressing?
Income tax preparation is frustrating and confusing for many people. Using the expert reputation and community networks of existing VITA organizations, One Economy will provide a free and sustainable portal for online income tax preparation. Partners will be chosen to participate based on their expertise in tax preparation and financial education as well as their proven effectiveness in large community campaigns and resources in order to support this program. The program will host on-site training modules that decrease the barriers in tax preparation and build capacity of these low-income households.
Do you have any existing partnerships, and if so, how did you create them?
The program's most important existing partner is One Economy's award-winning web portal, the Beehive. As filers visit the tax tools and educational content during their tax preparation sessions, they will gain access to the Beehive’s related educational content (www.thebeehive.org) designed specifically for low- to moderate-income households. Since its launch, more than 14 millions visitors have accessed information about improving their health, jobs, family, internet security, and money.
In addition, H&R Block will provide users with a tax tool that can serve visitors at no cost to the consumer and with no alternative business or banking solicitations. Following a thorough review of the market offerings, One Economy entered a multi-year partnership with H&R Block based on its ability to offer in-kind tax preparation and e-filing services in all 50 states.
Finally, last year, we hosted an invitation-only pilot of group assisted tax preparation model in Bend, OR; Boston, MA; Washington, DC; New York City, NY; and Sacramento, CA. Partners were selected from existing organizational content and referral partnerships based on existing tax preparation programming.
In which sector do these partners work? (Check all that apply)
Citizen sector (nonprofits, NGOs) , Private sector .
Impact
Provide one sentence describing your impact/intended impact.
This project will empower 10,000 households with free, sustainable, online tax preparation, saving clients thousands in tax preparation and predatory lending product fees each year.
Please list any other measures of the impact of your innovation.
Since the Beehive Tax Tool first launched in 2005, 370,000 people have accessed information about free tax preparers in their area, learned about the tax credits available to them, and read recommendations on how to best save and spend their tax refund.
Throughout this campaign, more than 12,000 clients have filed their own taxes online and have claimed $16.5 million in tax refunds. With greater than 200 percent growth annually, we know that more and more clients are finding this dependable and sustainable access to free online tax filing services.
Last year at the Beehive, more than 7,200 clients from all 50 states filed their taxes online for free. These clients reported an average adjusted gross income of $17,900 and more than 30 percent received the Earned Income Tax Credit. These indicators show that this important programming is providing valuable service to clients who need it most.
Lastly, community organizations will benefit from the Beehive tools that extend the reach of their available services.
Does your innovation address and/or change banking regulations?
No.
How many people does your innovation serve or plan to serve? Exactly who will benefit from your innovation?
Simple eligibility guidelines require participants have a valid email address, a valid Social Security Number or Individual Taxpayer Identification Number and an adjusted Gross Income not exceeding $56,000 USD.
After a successful demonstration project excited many large partnering organizations and municipalities, we are confident that this expert volunteer-led tax preparation event will benefit at least 10,000 people in 2008. Within three years, we predict that more than 100,000 tax returns will be self-prepared at host community sites by clients in small-group settings.
This Entry is about (Issues)
Sustainability
Financing source
How is your initiative financed (or how do you expect your initiative will be financed)?
Over the past four years, in addition to the in-kind support from H&R Block for various tax preparation events, we have received generous support from E*Trade for our tax preparation campaign and other financial education initiatives.
In addition to the Beehive, One Economy operates a portfolio of web properties with information for low- and moderate-income populations. One Economy is a financially sound global nonprofit organization with a balanced pool of government, foundation and corporate funders, ensuring that we will continue to make the content and tools on these sites available as long as the demand exists.
If known, provide information on your finances and organization:
Annual budget: $12.8 Million USD
Annual revenue generated: $14.6 Million USD
Number of Staff: 92 Full Time, Part Time and Volunteers
What are the main financial barriers and how do you plan to address them?
While the online resources and technical support from H&R Block are provided at no cost, sites will require computers and staff resources in order to successfully complete this project. We will continue to solicit funds in support of this project knowing that many potential funders will be attracted to the cost efficiency and effectiveness of this project and will likely support a proven model at a local level with both hardware and direct funding.
Aside from financial sustainability, how do you plan to grow the initiative?
Last year, there were more than 16,000 Internal Revenue Service certified organizations hosting one-on-one tax services that can implement one-to-many training programs. Partnership from a large tax preparer has established this initiative as a legitimate opportunity, but concept endorsement from the IRS will be key to continue this impressive growth. New partners will be attracted to the projects simplicity and cost-efficiency.
The Story
Please select one
What was the motivation or defining moment that led to the creation of this innovation? Tell us the story.
When I managed tax operations for another organization in New York City that prepares more than 40,000 tax returns a year, the program was criticized as an inefficient use of donated funds. Looking at total program revenue and volume of returns filed, tax return preparation averaged more than $70 each and took 60 minutes of 3 volunteers or staff per return.
From the client perspective, the waiting rooms mean up to eight hours of occupied time ending in a disconnected volunteer preparation of their tax returns. Understanding the back-end, I realized that the preparation of tax returns was simply data entry completed by a minimally trained volunteer.
For the clients with computer experience and simple returns without business income, their returns could easily be self-prepared. Allowing clients to interact with their tax returns would not only empower them to learn more about their current personal finances, but also encourage conversations in personal savings plans and long-term goals.
The following year, I re-designed a Beehive tax campaign, a self-help website that would enable clients to prepare and e-file their income taxes at no cost. Still active in the tax preparation community, I realized that thousands of volunteers could support the shift from one-on-one to one-to-many preparation and lead classrooms of filers through their preparation, which would significantly improve upon the volunteer and funding allocation. To that end, I engaged five tax preparation partners last year. The project was a tremendous success as demonstrated by our results, which indicated that 90 percent of clients enjoyed this process and would be able to complete their own taxes in the future.
Please provide a personal bio of the social innovator behind this initiative.
Managing the free tax preparation initiative, Lee developed and scaled partnerships to create tax filing programs in urban and rural markets. The program returned $9.6 million to 7,229 Beehive clients in 2008, doubling the previous year’s results.
Prior to this work, Lee managed the nation’s largest free low-income tax preparation network located in New York City. Lee holds a bachelor’s degree from The University of Texas (Austin) and a Masters of Science in Urban Policy from the New School University (New York City).
a) Please identify the individuals that your innovation benefits (Please check all that apply)
Producers , Consumers .
b) Do you help the people you serve to buy goods or services using financial innovation? If so, how?
No.
c) Do you help the people you serve to sell goods or services using financial innovation? If so, how?
No.
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Comments
This is a great concept that provides individuals the access to free tax-preparation and to engage in the opportunity to work towards financial empowerment (via learning to do their own taxes). I think it is a great idea that can easily change the way people look at taxes.
Ben Franklin once said: "An investment in knowledge pays the best interest" and I truly believe that once an individual invests the time to learn how to do their taxes, that this will pave the way for financial empowerment, and open doors to financial security.
However, I do have a couple of questions:
1. It seems to me that this program would aide the process and efficiency of a VITA tax-site; however, efficient tax-sites are not enough to compete with the prevalence of predatory services within communities. Additionally, commercial tax-preparers spend countless dollars on "glitz and glamor", advertising their services as early as possible. How do you plan on competing with these obstacles?
2. Provided you are able to overcome the above mentioned obstacles: As more people take part or learn of the Beehive services, there is a chance that individuals will choose to access the services from their home instead of going to the VITA site. Thus, how do you think this program will change the VITA and free tax-preparation movement and community?
caseyroncorni,
Thanks for your questions.
Alone, VITA sites and self-prepared returns represent about a third of all returns filed in the US. The more that we can encourage those within low-income communities to prepare their own returns and they can encourage family members and neighbors to do the same, we can to save more tax payers valuable refund dollars. As more households learn how simple tax preparation software has become in recent years, and computer usage becomes more mainstream across income groups, a movement like this will become more easily adopted.
On your second question, I think more people will prepare their returns from their home as the programming builds popularity. Where clients choose, they can prepare their returns at home, work, or a family or friend's computer.
---Lee
Interestingly, where this pilot has been in place for 2 years, there was impressive growth from 200 to 1,200 returns, as filers shared the information about this valuable resource with friends and family.
Talk about something that is scalable and would help millions of people! Each year low-income tax payers collectively fail to claim billions of dollars on their tax returns. Much of this is due to confusion and misunderstanding with the complex forms involved with filing taxes. I've seen Lee's solution in action and he is really doing ground-breaking work.
Although his solution is not out of the box microfinance, it could put additional funds into the pockets of millions of people, empowering them economically. Best of all the system is already in place and its already proven, it just needs an additional catalyst.
A truly remarkable idea...
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This seems like a great way to simplify such an important and often confusing aspect of life. This can certainly make a huge impact on many people's lives. My question is this: If indeed you want 100,000 filers to use this in just a few years, how do you plan to scale it accordingly? Is the plan to seek out VITAs around the country and host as many one-on-many workshops as possible? And is there a way that even that could be done online too, as a sort of e-tutorial on how to e-file for one's own self? Keep up the good work.
Colin
ColinR,
Thanks for your comment. As recent as 2005, community based organizations prepared as many as 2.4 million tax returns one-on-one for clients at around 25,000 tax sites. If in three years, the 50 largest organizations (those struggling most with capacity and volume) each prepared 10% of their tax returns with a more efficient instructor-led program, 100,000 returns would be filed. The web-based technology will facilitate impressive growth as participants can share the resources of the Beehive with their family and friends further spreading this resource.
---Lee
This program really accomplishes several things other than the obvious--helping people file their taxes online. Even more importantly, it enables people to learn the language of taxes while simultaneously empowering them to take action. It sends the message that self-prep and filing is not just for tax experts, but something everyone can do.
Bravo, Lee. This is most definitely scalable and seems like a sustainable model.
Dear Lee,
On November 3, 2008, the judges reviewed the entries for the Changemakers “Banking on Social Change: Seeking Financial Solutions for All” competition and would like to pass on the following feedback (listed below) for your entry. Thank you for applying and for your hard work in the field. We are excited to archive your entry to serve as a leading solution for the worldwide community of innovators who are seeking solutions that allow financial security to become a reality for everyone. We wish you continued luck with your sustainable, innovative, and socially impactful initiatives.
All the best, The Changemakers Team
“Income tax preparation is often a daunting and confusing process that many individuals are unequipped to handle. I like this idea as an innovative way to address this situation. I would like to learn more about this initiative’s plans for scalability since the service is limited to income tax preparation.”
- Changemakers “Banking on Social Change: Seeking Financial Solutions for All” Judges: Citi, The Times of India, Nokia, Soros Fund Management LLC, PlaNet Finance.
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Kaylena Bray
Ashoka's Changemakers
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