The Golden Moment: Building assets and partnerships through free tax preparation

Lou Tisler, Executive Director, Neighborhood Housing Services of Greater Cleveland

Challenge: Tax time is critical in building and sustaining assets for low- and moderate-income working families. They frequently use their refunds to make home, utility and basic needs purchases. But many families may face obstacles to getting their refunds because their preparers are uncredentialed, costly and prone to errors.



Tax refunds can be crucial for low- and moderate-income families in this country. They consistently report using tax refunds to cover housing, utility and basic needs expenses. But families face obstacles to receiving refunds. First, tax preparers are often uncredentialed, costly and prone to errors in their filing. Their fees and loan products can eat up hundreds of dollars from a tax refund. Second, many families are unaware of how to file their taxes or how to use their tax refunds wisely. Additionally, roughly one in 10 families does not have a transactional bank account to deposit refunds, leading to long waits and fees associated with receiving and cashing a paper check.

The mission of Neighborhood Housing Services (NHSGC) of Greater Cleveland is to provide programs and services to help families and individuals achieve, preserve and sustain homeownership. Greater Cleveland remains a challenged economy – still reeling from the great recession and an aging housing stock. More than 45 percent of people in Greater Cleveland are asset poor, creating a need for programs and services that promote economic development and bring dollars directly into neighborhoods.

The largest poverty relief program, the Earned Income Tax Credit (EITC), is delivered through the tax code and provides communities with real dollars to meet their basic needs and sometimes save for the future. In fact, combined with additional tax credits and deductions, a tax refund is often the largest paycheck for a working poor family all year. In the Cleveland area, the average EITC is slightly more than $2,400. The vast majority of EITC recipients who are NHSGC clients say that they use their refunds for housing, utility and food expenses.

But the full benefits of tax refunds continue to elude families in the Greater Cleveland area, who face obstacles — lack of tax code knowledge, expensive and unethical tax preparers, etc. — to receiving the funds to which they are legally entitled.

One NHS client, a single mother with two children, noted: "I spent so much last year on my taxes. I didn't know free was an option. I didn't know anything about the process just that I needed help and my money."
Some families NHS of Greater Cleveland works with choose not to file taxes at all because they lack information. Other families — and about a quarter of NHSGC clients – do not have bank accounts, forcing them to endure additional wait periods and fees associated with cashing a paper check.

Problems in the tax refund delivery system drain resources from the community. For every dollar spent at a check cashing store or paid to a tax preparer, there are fewer dollars going directly into communities.

NHSGC is part of the Volunteer Income Tax Assistance (VITA) program, where trained and certified volunteers prepare taxes for free for low- and moderate-income tax filers. NHSGC is also a leading member of the Cuyahoga EITC Coalition, which provides free tax preparation services in Northeast Ohio.

Delivering tax filing assistance services requires substantial collaboration from community partners. Volunteer recruitment is essential. Board members, staff, local financial institutions, college students and friends of the NHSGC provide generous volunteer hours. VITA is an intense volunteer commitment, involving eight hours of training, testing and client meetings, but the return on the volunteer experience is powerful. One volunteer, a NHSGC board member, remarked: "Helping this family receive $3,000 and understand how direct deposit works has been the highlight of my year…what a major impact."

Financial institution partners provide NHSGC not only with volunteers, but also with access to fair and safe transaction account products. Several financial institutions work with NHSGC to provide account opening at tax time, allowing clients to open low-cost checking accounts and use direct deposit for their tax refund. NHSGC further provides financial capability counseling and coaching before, during and after tax time.
After five years of offering free tax preparation programs, NHSGC continues to build success and partner with community groups to improve the financial health of northeast Ohio. On average, NHSGC serves 1,000 families annually, bringing in more than $2 million a year in refunds and savings to the community. NHSGC also use tax assistance programs to enroll clients in homebuyer and financial education courses.

Tax time is often the most important financial moment of the year for low- and moderate-income families. Having NHSGC act as both a preparer and a steward for clients greatly benefits the community. NHSGC continues to integrate the free tax program into a diverse offering of counseling and community development efforts.