More than 20,000 Summit County taxpayers at the lower end of the income scale shell out money to have their taxes done, even though they could get the service for free.
Perhaps equally as confounding, 1 in 5 taxpayers do not file for a tax credit that is owed to them — an Earned Income Tax Credit worth as much as $5,981.
The federal credit is available to low- and moderate-income workers for 2012, and those who qualify for it are eligible for free help with their tax preparation through various programs, such as the nationwide Volunteer Income Tax Assistance effort.
This month, home health aide Angelisa Abernathy, 26, was among those taking advantage of the free electronic tax filing program at the nonprofit Akron Summit Community Action Inc.
Abernathy said she wasn’t always so savvy about her taxes.
“I feel like I got cheated out of my money,” she said, recalling that she once paid a tax preparer.
She said her refunds have been significantly bigger since she’s been coming to the Akron agency, and wonders whether she previously failed to file for the earned-income credit.
“Depressing and frustrating,” is what tax policy researcher David Rothstein says when he looks at the numbers of people who don’t use the free programs and don’t file for the earned-income credit. Rothstein tracks the IRS data for research group Policy Matters Ohio.
Introduced in 1975, the tax credit is the nation’s biggest anti-poverty program and was designed in part to offset the burden of Social Security taxes and to provide an incentive to work.
Akron Summit Community Action is among groups working to ensure that people claim the credit. They also seek to keep taxpayers from signing up for expensive fast-cash loans and other products offered through some tax preparers.
“We don’t want taxpayers to go and get a loan when you can get your taxes prepared at no cost,” program administrator Gloria McGhee said.
Last year, more than 1,900 area taxpayers got their taxes done for free through the agency and its coalition partners, which work with IRS-certified volunteers.
That’s up from 204 returns in 2004, when the local campaign first began to help people claim the federal tax credit. Volunteers can do state and federal taxes.
“I tell everybody about this,” said Cuyahoga Falls resident Bonnie Miller, 41, who was at the agency’s West Exchange Street site in Akron last week.
Before spotting a flier about the agency, Miller forked over $75 or more a year to have her taxes done. “I spent that money at least five times before I knew about this,” she said.
Community Action promotes the program through signs on Metro buses, notices in utility bills and various fliers, program administrator McGhee said.
Still, it’s an uphill battle.
An analysis by Rothstein with the Policy Matters Ohio group shows that many people who are paying to get their taxes done are those who can least afford it:
• 21,326 Summit County taxpayers receiving the tax credit paid for tax preparation in 2011; that is half the number of all people in the county receiving the credit that year.
• 15,500 Summit taxpayers receiving the credit used a pricey method to get their refunds faster, such as taking out a loan.
Pressure from consumer advocates and federal regulators has resulted in fewer of the so-called refund-anticipation loans. Now, some tax preparers, as a way to get people in the door, are promoting “refund-anticipation checks” or reloadable debit cards.
The refund-anticipation checks, Rothstein said, are a way for paid tax preparers to appeal to taxpayers low on cash and unable to pay up front to have their taxes done. “They’re essentially a way for a paid preparer to do your taxes and say, ‘Don’t worry about paying us, we’ll just take it out of your refund check,’ ” Rothstein said.
Consumer advocates worry that some taxpayers might not realize that the checks and cards aren’t all that quick. They don’t get the money to the taxpayer any faster than the IRS can through direct deposit, the advocates say.
“Years ago, there was a purpose for refund-anticipation loans — getting your refund in the same day,” Rothstein said. “A refund-anticipation check generally doesn’t shave time off your wait for a refund.”
Rothstein said such products are a big lure: Roughly 70 percent of Summit County taxpayers who paid to have their taxes done — and received the earned-income credit — took out a loan or paid for a refund-anticipation check.
This year, the turnaround time from federal filing to direct deposit of the refund can be 21 days or shorter, McGhee said.
Rothstein said taxpayers filing electronically might obtain their refund in as quick as a week.
The group AARP hosts free tax-filing clinics at area library branches and other sites. Free tax help also is available through the Ohio Benefit Bank, which teams up with local nonprofits at various sites.
AARP’s Tax Aide focuses on senior citizens, as well as younger low- and moderate-income taxpayers.
AARP volunteer Glenn Atwood also stressed that free doesn’t mean low quality.
“Each return is seen by two different people,” Atwood said. “People are quality checking it to make sure all the numbers are in the right place.”
Katie Byard can be reached at 330-996-3781 or firstname.lastname@example.org.