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.