Improving Financial Stability One Tax Dispute at a Time

Mark was awarded a settlement from a wrongful death suit, but his legal problems did not end when he received the money. The IRS processed this money incorrectly, treating it as taxable income. At the point when Mark turned to the Center for Economic Progress (CEP) for assistance, he had an IRS balance exceeding $130,000 and a levy on his wages. A Taxpayer Advocate at CEP’s Tax Clinic was able to help him correct his account with the IRS. Because of CEP’s help, the IRS ended the wage levy, eliminated Mark’s balance, and refunded him over $16,000 for wrongfully levied proceeds.  Almost half of this money has gone to cover Mark’s student loan debt.

Without the assistance of CEP’s Tax Clinic, Mark and many other low-income taxpayers might still be hopelessly stuck in confusing proceedings with the IRS.  Through the Investing in Justice Campaign, you help CEP’s Tax Clinic, which provides free legal assistance to low-income people facing tax controversies with the IRS. The Clinic works on about 300 cases each year, with some carrying over from past years. In 2015, it helped people like Mark eliminate or reduce $750,000 in tax debt. As an organization, CEP focuses on policy advocacy and moving low-income families out of financial uncertainty. In addition to representing individuals in the Tax Clinic, CEP also has a Tax Preparation Project and a Financial Services Project.

Tax Clinic Director Paul Harrison emphasized the relationship between CEP’s three projects.  Each is designed to improve financial stability for the people served and all complement one another. The Tax Preparation Project provides low-income people with free, high quality tax preparation and frequently assists people who are eligible for a tax refund to apply for it. It is located in both Chicago and Springfield, with additional online resources. Through the Financial Services Project, CEP provides year-round workshops and one-on-one financial coaching to help clients set financial goals; create a spending plan; access safe and affordable bank products like bank accounts and small dollar loans; and review and correct credit reports and improve credit scores.  Frequently, clients work with more than one of the projects during their time with CEP.

CEP’s services impact clients’ lives greatly. Frequently, when taxpayers come to the Tax Clinic, they are motivated by external factors in addition to letters from the IRS. For example, parents might decide to finally seek help regarding a dispute with the IRS when they need to apply for federal financial aid as their children are starting college. Another example is when a single parent with custody of children is flagged by the IRS because the other parent wrongly claimed the children as dependents. In these ways, CEP is able to resolve conflicts that affect other areas of clients’ lives in addition to helping them improve their financial stability.

According to Paul, volunteers are the heart and soul of CEP. The Tax Clinic works with a variety of volunteers including attorneys, certified public accountants, and IRS Enrolled Agents. CEP provides training and support to its volunteers.  Many volunteers start by working in the tax preparation project and become interested in representing people in the Tax Clinic. Some volunteers work in both projects because many tax preparation clients are referred to the Tax Clinic and many at the Clinic need assistance with tax preparation from the years in dispute.

While the Tax Clinic operations are fairly fixed, the yearly agenda and flow of clients to CEP can change based on policy changes at the federal level. For example, filings were lower in January 2017 relative to the same period last year because the Protecting Americans from Tax Hikes (PATH) Act requires the IRS to delay issuing refunds for certain taxpayers claiming the Earned Income and Additional Child Tax Credits until February 15.  Many low-income households factor tax refunds into their budgets, relying on the money in January or February to pay additional heating and utility costs incurred during the winter months. Because tax returns filed early this year were not processed until February 15, individuals did not begin receiving tax refunds until March, meaning that they had less incentive to file their taxes early. CEP advises individuals to still file their taxes as soon as possible because its services are first come, first served.

Another factor potentially impacting the number of people seeking help from CEP is uncertainty in the immigrant community about how personal information will be used under the new Administration. Currently, people who do not qualify for a Social Security number can obtain an Individual Taxpayer Identification Number (ITIN) from the IRS for the purpose of filing taxes. This number is used by foreign nationals who are paid for work within the US and can be used by undocumented immigrants who wish to file taxes. Some undocumented immigrants have expressed concern about filing personal information with the IRS, but CEP continues to advocate that everyone who can file taxes do so because they have the potential to receive tax refunds and, in the case of undocumented immigrants, can demonstrate a commitment to obeying US laws and contributing economically if they do become eligible for legal status at some point in the future.

For more than 25 years, CEP has been a trusted source of free tax and financial services.  The organization’s work helps individuals and families move toward financial stability, lifting communities in the process.