While many people dread tax time, trying to figure out the intricacies of federal tax forms can be especially daunting when youre homeless. Even the basic question of what address to use can cause a problem for homeless persons. Moreover, more complicated questions on the forms for tax credits for low-income workers may mean that homeless persons miss out on refunds they are owed - refunds that could help them move more quickly out of homelessness.
Nationally, about 44 percent of the homeless population works in any given month. Many of these workers may be eligible to receive the Earned Income Credit (EIC), a refundable tax credit for low-income workers. The refunds can provide money needed to afford security deposits, pay off outstanding debts that are damaging credit histories, and take other steps that can help move people out of homelessness.
For tax year 2004, the maximum refund for single individuals is $390. A parent with two children may qualify for up to $4300.
But many homeless workers may miss out on tax credits they are owed because they don't know about them or don't know how to file for them, says the National Law Center on Homelessness & Poverty (NLCHP), a national legal advocacy group based in Washington DC.
Some may end up going to paid tax preparers, resulting in a net reduction of their overall refund because of the cost of preparation.
But for homeless persons in the District, there is help. Clinics that NLCHP operated this season provided free tax preparation assistance to homeless workers in the District of Columbia.
Using volunteers trained by the IRS Volunteer Income Tax Assistance (VITA) Program, NLCHP offered free tax help to homeless workers at 13 sites, including outreach talks and clinics.
NLCHP-sponsored sites differed from other VITA-sponsored locations in DC because they were offered at homeless shelters, domestic violence shelters, and facilities where homeless families and individuals receive services.
For the 2004 tax season, NLCHP helped 65 homeless workers in D.C. get back tax credits and refunds totaling $36,984. The average refund for a person with no dependents was $375 and the average refund for a person with one or more dependents was $2,896.
NLCHP volunteers also provided assistance to 34 additional homeless persons who sought tax guidance, but not full return preparation, at the clinics.
In addition to helping the clients receive refunds they were owed, NLCHP's assistance also saved the clients the money that they might have otherwise paid to for-profit tax preparation companies - payments that can take a significant bite out of a refund.
More than 1/3 of clients served at the NLCHP sites reported that they did not previously know about the EIC or how to apply for it. Some reported barriers to claiming the EIC, such as difficulty understanding the tax forms, lost W-2s, or lack of an address for the IRS to send the refund.
NLCHP staff and volunteers worked with clients and caseworkers to help them obtain the information needed to file.
The NLCHP tax preparation program was funded from a grant from the Naomi and Nehemiah Cohen Foundation.
