As we approach the end of another tax year, I am encouraging my colleagues at the CFPB, and across the Federal government, to seize this once-a-year opportunity to help people in their communities build financial stability. Consider which provide free tax preparation services to qualifying individuals, as well as opportunities to make the most of this important financial moment.
At the CFPB, it is part of our mission to promote opportunities for consumers to maximize their tax refunds and credits, such as the child tax credit and the earned income tax credit, and to have access to wealth building and financial services during the income tax preparation process.
Every tax season, the CFPB offers support to the IRS sponsored Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs that provide free tax help in communities around the country and that are dedicated to encouraging their customers to use their tax refunds to better manage their financial lives. that having a savings cushion provides more financial stability and security as well as increases a person’s financial well-being. For people with lower incomes, tax time represents a unique opportunity to save because a tax refund is often the largest check they will receive all year. Many consumers also use these funds to reduce debt.
The 2022 tax filing season will soon be upon us
The upcoming tax season may provide some new opportunities for consumers to manage their household balance sheets, especially for families with children who may be eligible to receive the child tax credit and the child and dependent care credit. The American Recovery Plan Act expanded these tax credits for 2021 to increase the amount that eligible families will receive and to make them refundable, which means that if people do not owe any taxes, they will receive the full amount of the credits as part of their tax refund. It is estimated that the effect of these expanded tax credits will reduce child poverty by up to 50%. In order to claim the full benefit of the credits people will need to file a tax return in 2022. Many will need help filing a return.
The importance of VITA and TCE
VITA and TCE programs have been essential to providing much needed tax preparation services to a significant number of people with low incomes and low wealth as well as to people in historically underserved communities. These services help families by preparing their tax return for free allowing them to make the most of their tax refund. Given the wide-ranging financial devastation of the pandemic, this year’s need may be the greatest ever. VITA and TCE programs, recruit tens of thousands of volunteers each year, provide them training and technical support, and schedule opportunities for them to offer this valuable free service in their local communities.
VITA and TCE averaged more than 3.5 million tax returns prepared annually between 2013 and 2019. But due to the COVID shutdown, which occurred midway through the 2020 tax season, and the need to convert to virtual tax preparation in the 2021 tax season, the number of returns prepared declined significantly. The programs also lost volunteers who were concerned about risks to their health, or who did not have the capability to provide services virtually.
As we at the CFPB focus our attention on the many financial needs of economically vulnerable consumers, I am encouraging our staff, colleagues across other federal agencies, and people in the financial service sector to consider answering this call to action and to support families in their communities by to prepare returns for low income households in need of tax preparation services.
Watch more about the experience from the IRS video on volunteering