Thursday, September 3, 2015

How Tax Preparers Like H&R Block are Making the Tax Code More Complicated for America’s Poor


H&R Block has lobbied Congress to make qualifying for an important low-income tax credit in the future more difficult; and so far, they’re succeeding.
The H&R Block business model, and that of other tax return preparers, is predicated on taxes being difficult to file. But, as Vox reported Monday, the Senate Appropriations Committee passed a funding bill that targets one of the most important credits for low-income people: the Earned Income Tax Credit (EITC).
The funding bill covers the IRS. The accompanying report instructs the IRS to quadruple the length of the form that taxpayers must fill out with their eligibility information. The IRS requires the form to qualify for the EITC. The bill, being considered by the full Senate, would expand this form from one to four or five pages.
In a statement, H&R Block told IJReview:
“This issue is about reducing tax fraud and protecting the future of the EITC. By its own estimate, the Treasury Department believes $16–19 billion in improper EITC payments were paid out in 2014. …
“That’s a threat to the millions of Americans who legitimately receive the EITC. Reducing fraud … will better protect this program and the people who really deserve it.”
Despite the program’s frequent overpayments, it is one of the few tax provisions that receives praise for alleviating poverty across party lines.
The EITC offers refunds for people who don’t make enough money to file taxes normally. Currently, Vox reports, recipients only have to fill out a single-page form. The IRS also offers free tax preparation centers for poor people who have trouble completing their returns.
Despite this, in 2014, about two-thirds of EITC recipients paid to have their returns prepared, which means checks are cut to tax preparers instead of America’s working poor.
More about the Earned Income Tax Credit:
  • It is a federal tax credit for low- and moderate-income working people;
  • People with and without children and spouses are eligible;
  • Creates an incentive to work because the value of the credit grows with each additional dollar of earnings until the worker reaches the maximum;
  • EITC expansions have been found to be the most importantreason why employment rose among single mothers in the 1990s — not welfare reform, not a strong economy;
In the 2015 tax year, families with children and an annual income below $39,000 may be eligible for the federal EITC. That threshold can go up to $53,300, depending on marital status and number of children. Working people with no children and incomes below $14,800 (up to $20,300, depending on marital status) may also be eligible.
Almost 28 million Americans received EITC tax credits in 2013, accordingto the IRS, with an average refund of $2,407. These payments totaled $66 billion and, currently, four out of five people eligible for the tax credit claim it.
But if Congress implements this change in paperwork, according to Robert Greenstein, President of the Center on Budget and Policy Priorities:
“No one should be surprised to see large numbers of individuals who now file their own returns either giving up and not claiming the EITC due to the added complexity or turning to paid preparers, who could charge hundreds of dollars for their services.”
In a letter sent late last year to the IRS commissioner and the Department of the Treasury, H&R Block CEO William Cobb defended the change as an effort to reduce improper payments and fraud.
H&R Block emphasized this again to IJReview:
“This is not about competitive business interests.”
H&R Block has spent over $14.3 million in lobbying since 1998, according to the Center for Responsive Politics.