Nina Olson, the National Taxpayer Advocate, has recommended that the IRS review the costs and benefits of delaying refunds payments  until after April 15 in her report to Congress:

The Speedy Issuance of Tax Refunds Drives Refund Fraud and Identity Theft, As More Research Is Needed on the Costs and Benefits of Holding Refunds Until the End of the Filing Season

Most of us in the VITA world are concerned about opportunity of loan products to reemerge created by the February 15 delay. A delay to April 15 would almost guarantee the return of the refund loan and likely create the kind of pay to play system that Nina Olson eloquently argues against.

If refund loans reemerge as a market force, I believe the market will segment itself into two sets of taxpayers a set who pay a premium for tax assistance using a refund advance to receive funds and pay fees with the advance before April 15, and those who use less costly practitioners and online filing services that do not offer a refund advance.  I anticipate that the practitioners offering refund advance will have virtually every customer use it, because the practitioners cannot charge additional fees for the loan.  A practitioner offering the advance must recover the cost of the advance in some other way likely charging higher fees in general.  While the advance drives up cost to the taxpayer, it will not improve the accuracy of preparation that seems to me the definition of a pay to play system.

As the pro bono practitioners, it is probably up to us to make sure the IRS accurately determines the cost to taxpayers of such a change.  If delaying refunds is the best way to protect taxpayer from having their refunds stolen and their children’s identities stolen to make fraudulent claims, the costs may be worth it to the families we serve. Low-income taxpayers are not the priority of the other parties involved, so pay attention to discussions about further delaying refunds make sure other options are assessed.

I may be just trying to hope for a silver-lining with the EITC refund delays, but I wonder if fewer taxpayers will get fewer Automated Underreporter (AUR) CP-2000 notices because of it..  Perhaps, not as many taxpayers will rush to the tax site before they get all their W-2s.  Perhaps, the IRS will have data in time to make corrections before the refund is sent. I suspect the answer is no and taxpayers will come to VITA to file amendments to that return they filed in January for the Refund Advance and to wonder how they are going to pay back the IRS.

I wish that the IRS messaging around the delay really focused on telling taxpayers not to rush and make sure they had all their documents and information in order before they file and not file like you always have.

Many (perhaps most) taxpayers with expired ITINs will not be able to renew them by April 18.

The IRS is projecting that the processing of ITIN renewals during filing season may take 11 weeks. Unless I am mistaken, January 31 is 11 weeks before the filing deadline.  Clearly, many taxpayers with expired ITINs will not be able renew their ITINs before the deadline, April 18. Taxpayers with expired ITIN are still required to file their return or file an extension and pay any amounts due by the filing deadline.

Please don’t turn these taxpayers away they need your help If they don’t file, they may get hit with penalties. Only one in fifty ITINs should be affected, so the impact to your site should be minimal unless you serve a lot of taxpayers with ITINs.

Below I have provided three options, I would consider for a site process when assisting these taxpayers at your tax sites during the tax season:

Suggested Process 1: Volunteers prepare the returns, site holds e-file for later transmittal and files an extension:

When you identify taxpayers with expired ITINs:

1. Prepare the returns as normal, including forms required for e-filing. Preparing the return gives an accurate calculation of any balance due for the extension.
2. Save the electronic copy of return and paper work for later e-file transmittal when the taxpayer informs you that their ITIN is renewed.
3. Taxpayers may receive notification of renewal before or after the 18^th, so you need a system to handle transmittal before and after the filing season.
4. Complete an extension using the information from the completed return.
5. Transmit the extension to the IRS.
6. Inform the taxpayer that the extension is filed and tax due must be paid by the filing deadline April 18.
7. Critical: The taxpayer must pay any amounts due by the April 18^th to avoid penalties. Make sure they understand the extension does not give them more time to pay.
8. Inform the taxpayer that they need to contact your organization when they are notified of their ITIN renewal so you can transmit their e-file and provide contact information.
9. In addition to saving the return for later e-file, provide a copy of the return that taxpayers can submit by mail if they choose to paper file or have difficulty contacting you later.
10. If Taxpayer has not already applied for renewal, prepare W-7 or provide a referral to ITIN assistance.
11. Follow-up with taxpayers who still have e-files on hold in August or September.

Suggested Process 2: Volunteers prepare the returns, files an extension, and provides a paper return to be filed by taxpayer:

Follow steps from Process 1 by preparing a return and transmitting an extension, but instead of saving e-file for transmittal later:

1. Provide the taxpayer a copy of the return so they can file a paper return once they receive the ITIN renewal notification from the IRS.
2. Make sure the taxpayer knows to pay any balance due by April 18^th and that the return should be sent later.
3. Make sure the taxpayer knows to file their return by the Oct. 15 deadline.
4. Provide the correct mailing address for their return.

I would use this process if I lacked capacity to assist taxpayers year-round.

Suggested process 3: Just e-file the returns with expired ITINs.

Sites can simply ignore that the ITIN is expired and file the return. The IRS will accept the e-file and process the return.

1. Complete return and transmit e-file ignoring that the ITIN is expired.
   1. Inform the taxpayer that the IRS will follow-up with letters about the expired ITIN.
   2. If possible, provide a referral to additional assistance with ITIN renewal.

If my site serves few taxpayers with ITINs, I would probably keep it simple and just let the taxpayer know that the IRS will contact them about the ITIN renewal and will provide any refunds due to the taxpayer at some point after the ITIN is renewed.

Please share your thoughts and suggestions.

IRS, Security Summit Partners Announce “National Tax Security Awareness Week” beginning Dec. 5

IR-2016-156, Dec. 01, 201

WASHINGTON – The Internal Revenue Service and its Security Summit partners today announced the start of “National Tax Security Awareness Week.” As part of the Security Summit effort, the IRS, the states and the tax community will share a variety of information throughout next week to educate taxpayers on steps they should take to protect themselves from identity theft and tax scams as well as protect their valuable financial data in advance of the upcoming filing season.

The week, which runs Dec. 5-9, will feature a series of consumer warnings and tips that will be released daily and featured on the Taxes. Security. Together. web page and a one-page Publication 4524, Security Awareness for Taxpayer

As I was preparing this post on the best volunteer recruitment tactics that VITA programs tend to under resource, this message appeared in my Facebook feed:

Wanna volunteer with me?!

If you’re feeling powerless given the current political climate and you’re looking for something to do about it, I highly recommend volunteering for a VITA program!

VITA programs are a great way to help members of your community! We prepare taxes for low income individuals and families to help them claim tax credits that exist to help remove them from poverty and to help them avoid predatory tax scams. Additionally, you can meet other volunteers who care about their community (better than MeetUps) and build highly valuable skills (tax preparation training and experience.) I’ve really enjoyed my time volunteering and truly value the compassionate friends I have made through the program.

So… What do you say?! Join us?

The message included a link where I could share contact information quickly in a google form. Think what would happen if you got every volunteer to share a message like this with their friends. How dramatically would your recruitment increase?

Generating more referrals from your volunteers all about providing the tools that make it easy and of course asking them to ask.

• Provide your volunteers a message they can easily forward to their friends, family and co-workers.
• Encourage but don’t require them to customize that message.
• Make the message email, Facebook, Twitter, and other social media friendly.
• Make signing up easy and immediate – a link where contact information can be shared is perfect
• Provide a phone number and email contact for your organization so people contact you with questions
• Be ready to follow-up with new recruits quickly – if you don’t your volunteers will stop bothering to make referrals and may be upset with you
• Provide information on any recruitment priorities. if you need bilingual volunteers or volunteers for specific locations share that with your volunteers. – Don’t encourage recruitment of volunteers you can’t use

The critical piece is to develop and properly resource a referral strategy that makes the referrals a light lift for your volunteers. Some modest expenditure and increased effort around referrals can have dramatic impacts for your program. Remember to put resources in place to respond to these referrals.  If your volunteers make the effort to refer their friends, you need to respond quickly and professionally or risk damaging your relationship with your volunteers.

Look beyond your current volunteers for referrals.  Have a volunteer referral strategy with community partners, site hosts, your board, your staff and your donors. Finally make all your recruitment materials something that can easily be shared and forwarded.

How much effort do you put into recruiting returning volunteers and getting your volunteers to recruit their friends?  By far the lowest cost and most efficient way to recruit volunteers is to retain volunteers from year to year and get those volunteers to refer their friends.  Form my years of providing technical assistance to VITA organizations, they are often failing to articulate volunteer renewal and referral strategies and don’t put enough energy and resources behind these efforts.

In this post, I will focus on renewal and follow-up with a post on generating referrals.  I am distinguishing renewal from volunteer retention which I consider year-round efforts to delight your volunteers that put you in position for successful renewal.  If you are not delighting your volunteers during the rest of the year, renewal will be very challenging.

Renewal Strategies:

1. Have at least three times as filing season approaches that you make discreet appeals to last year’s volunteers to volunteer again, below are examples of timing.
   • When you start registering volunteers for the season
   • When volunteer training begins
   • When it is the last chance to train before the season

Note: Three appeals are the minimum. Most programs communicate with their volunteers too little and not too much.

2. At least once (again a minimum), appeal to former volunteer who did not volunteer last year. The clear majority of active volunteers from one year who do not renew the following year indicate scheduling demands from their personal or work life was the reason they did not volunteer. These factors change from year to year. An email saying, “We want you back” can bring back some great experienced volunteers.

3. Engage your site leaders in encouraging their volunteers to renew
   • Draft an email they can easily forward to their volunteers
   • Provide a contact list of their volunteers from last year
   • Consider reimbursing or otherwise supporting a preseason social gathering

4. Create some benefits for being a returning volunteer, some examples follow.
   • Give returning volunteers a chance register for sites and training first
   • Reserve some training and site slots for returning volunteers only
   • Host a returning volunteer cocktail party
   • Have streamlined training for returning volunteers
   • Provide opportunities for deeper engagement and specialized training

The import thing is that you articulate your volunteer renewal plan and put resources both staffing and financial behind that plan.  A small investment in generating renewal will pay big dividends for your program.

For at least the past ten years, I have heard volunteers saying “taxpayers have no interest in savings products taxpayers only want tax preparation” and those championing savings products saying that “engaging taxpayer in savings is really a matter of getting buy-in from the volunteers”. I believe that both statements are describing an aspect of the truth about recent savings interventions and missing the larger picture where taxpayers served by VITA are saving and entering financial mainstream.

There is ample evidence that VITA clients’ propensity to save their refund is increasing.  In 2015, 55% of taxpayers served by VITA direct deposited into a checking or savings account up from about 40% in 2008, a 38% increase during the great recession.  VITA taxpayers direct deposit rates are approaching that of all taxpayer 62%.   Note that about 17% of VITA taxpayer have a balanced due which would preclude direct deposits and many others have refunds intercepted for debts, so less than 28% are choosing not to deposit refunds into a bank.

So why do volunteers and others think our taxpayers don’t save? I think primarily we are convinced by anecdotal information that many individuals who direct deposit save for a short period, are in debt and desperate for refunds by next filing season.  Research that shows how refunds are used and how long refunds are retained that confirm are beliefs are scant. A secondary reason is recent savings initiatives offering around savings bonds and split refunds have shown no significant up take less than 1% of taxpayers choose either and the most successful sites that put significant energy and resources into promoting split refunds and savings bonds have uptake of less than 5%.

So here is where we stand now: 1) Most VITA taxpayers save even if only for the short term and VITA has had significant impact increasing the use of mainstream banking products. 2)  Current initiatives to increase saving for the longer term do not appear to be working. 3) There is a significant need for research into longer term savings of VITA taxpayers how well are the saving and what are the barriers and challenges.

This post is the first of a series that I plan to share on ways VITA practitioners can improve financial outcomes for the taxpayers we serve and bring forth a more economically just society. Before discussing, what more we can do for taxpayers, I think it is critical that we state the vital financial empowerment work at the core of VITA and the importance of being the tax preparer of last resort.

Keeping taxpayers tax compliant is VITA’s most powerful asset-building function. If taxpayers have trouble with the IRS or the state departments of revenue, all other efforts to improve their financial situation are destine to fail. We are also providing access to home ownership, higher education and even citizenship, because providing an accurate tax return is critic to accessing these opportunities. With the possible exception of the credit reports, a tax return is the most important financial document for most people.  VITA provides access to financial opportunities to millions of taxpayers who could not otherwise afford quality assistance simply by providing tax assistance.  VITA tax assistance is a critical financial empowerment service.

We as practitioners must keep the importance of tax compliance and accurate preparation central to our mission in this work.  Otherwise, our closest allies will see VITA as simply a way to leverage large refunds into other asset-building strategies, and we will be pressured to stop serving some of the most vulnerable taxpayers, those with a balance due or small refunds. We will also miss the opportunity to connect these most vulnerable taxpayers to the other asset-building opportunities our allies in this work provide.

The SPEC Training Product fact sheet lists 4012 as becoming an electronic only publication  after 2017 filing season.  4012 is a critical quality resource for the VITA program.  I believe it is essential that the IRS reconsider this decision that will have negative impacts on return accuracy at VITA.

I have difficultly understanding what budget expenditure IRS SPEC could make that would have more benefit to the quality and accuracy of VITA return preparation than printing 4012. In addition, IRS Quality Site Requirement 4 requires VITA programs to have tax preparation reference resources at VITA tax sites.  So in essence, the  IRS decision to not print the publication 4012 is simply a cost shift to its VITA partners who will need to print 4012 or purchase another product.

As a consultant to this field, I would be happy to take advantage of the business opportunity to develop a 4012 replacement that VITA partners can print at lower cost than the IRS digital 4012.  However, I believe it is in the best interest  of VITA that the IRS continue printing hard copies of the 4012. I hope readers of this blog will let their SPEC relationship managers know that you need the 4012 to continue as a printed document.