Opportunities for Improving Referrals by VITA Sites to LITCs

March 2, 2022 by 3 Comments

We welcome guest bloggers Janice Feldman and Jonathan Blake. Janice is currently a volunteer attorney at the Harvard Law School Federal Tax Clinic. Prior to volunteering at the clinic, Janice worked for over 30 years in tax administration, first with the Department of Justice, Tax Division and then with the IRS, Office of Chief Counsel. She retired in 2019. At the time of her retirement, Janice was the Division Counsel/Associate Chief Counsel (National Taxpayer Advocate Program) at the Office of Chief Counsel. Jonathan is a student attorney with the clinic and one of the leaders of the law school’s VITA clinic.  Keith

January 24th marked the start of this year’s tax filing season, and as a result the Volunteer Income Tax Assistance (VITA) program is now available to aid qualified taxpayers with the filing of their returns. Depending on the location, assistance may be given in person or virtually through a secure website. We applaud the wonderful service the VITA volunteers provide and their ability to adapt to the pandemic conditions through the use of technology.

Since 1969, the IRS’s VITA program has offered free basic tax return preparation to qualified individuals. These individuals include taxpayers with household income below a specified cap (currently $58,000), disabled taxpayers, and limited English-speaking taxpayers. The locations where the assistance is provided – called VITA sites – are set up in public libraries, community centers, and similar facilities.

Although the IRS oversees the VITA program by administering training for volunteers and making grants, the IRS does not staff the sites. Community members, ranging from college students to retirees, sign up to volunteer; neither work experience nor formal education in taxation is required. VITA is not intended to be a replacement for the broader set of services a taxpayer may obtain from a tax practitioner. (However, tax practitioners make excellent VITA volunteers. To learn more about becoming a volunteer and how to be matched with a local VITA site, please click here).

In doing research at the Harvard Clinic, it has come to our attention that sometimes VITA volunteers may not realize if an issue is beyond the scope of what a volunteer can handle, or if they do, may not know how to direct the taxpayer to get the help they need elsewhere. This blog post attempts to put a spotlight on this problem and propose a few ideas to remedy it.

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Some taxpayers who visit VITA sites have tax issues that extend beyond preparation of their tax returns. For this reason, VITA volunteers are trained to consult the Scope of Service chart. This chart states whether returns requiring certain IRS forms and schedules may be prepared by VITA.

There exists a whole spectrum of tax matters that are not addressed on the Scope of Service chart. For example, responding to a notice of deficiency is not a part of the list of services that a VITA volunteer can do. So what happens if among the envelopes containing the taxpayer’s W-2 and 1099s, the VITA volunteer sees a notice of deficiency was issued to the taxpayer and his ex-wife, claiming additional tax due for an earlier tax year because the ex-wife has unreported income? Alternatively, the taxpayer could present the notice to the volunteer after reading the question about IRS letters on the VITA intake form, which taxpayers fill out upon arrival at a VITA site. The volunteer may not understand the significance of the taxpayer receiving the notice of deficiency, and may simply prepare the current year return and not advise the taxpayer about the significance of the notice or that a Low Income Tax Clinic (LITC) might be able to help. Per Congress, VITA sites are encouraged, when appropriate, to inform taxpayers about LITCs. See Internal Revenue Code Section 7526A(g)(3).

In this example, the taxpayer might be a good candidate for obtaining innocent spouse relief. The VITA volunteer cannot explore this issue, but the LITC can. And even if the volunteer recognizes the need for a referral to an LITC, the volunteer may struggle with the mechanics of the referral as no procedures for referral are in place. Likewise, there are no clear rules on which LITC to contact. Examples like this highlight two challenges for VITA volunteers and site coordinators: (i) educating volunteers so they can identify fact patterns where LITC assistance would be appropriate and (ii) effectively connecting the taxpayer with an LITC.

The first challenge is largely dependent on the adequacy of training. The site coordinator training materials dedicate one slide to LITCs, consisting primarily of links to IRS webpages. The lengthier site coordinator handbook does enumerate issues that LITCs can handle, but it is unclear if site coordinators who do not have experience in these tax areas will know enough to spot potential referral opportunities after just reviewing this list. The training materials for volunteers go into no greater detail. Importantly, none of the exams required to be a site coordinator or a volunteer have any questions on making a referral to an LITC.

An initiative from the Center for Taxpayer Rights, the LITC Support Center, is attempting to fill this gap in training. As covered in a recent Procedurally Taxing blog post, the LITC Support Center is “creating materials for VITA sites and taxpayers about … what they can do via self-help and when they need to reach out to an LITC for assistance.” These documents are available – and will be added to over time – on the website’s Resources for Taxpayers tab. The IRS should consider incorporating the same sort of content in the VITA training materials and exams it produces.

Updating the training materials should of course not limit exploration by the IRS of other measures. In particular, perhaps the optimal time to ask the taxpayer about receipt of IRS letters or other tax issues is when the VITA volunteer has finished preparing the return, not during the intake process. This is also a natural point to discuss LITCs if the taxpayer were to owe money for the tax year.

The second challenge is to ensure the taxpayer is properly connected to someone at an LITC. Given that the population of taxpayers who utilize VITA services includes low income and limited English-speaking taxpayers, these individuals may have limitations, so simply providing an email address or phone number for a local LITC might be insufficient. The current official training materials provide no rules regarding how to make a referral. Thus, the official training materials should be revised to include specific rules and best practices regarding how VITA volunteers should reach out to their LITC partners.

The comprehensive volunteer training publication contemplates LITCs and VITA sites will be in contact regarding the procedures for referring taxpayers. It states, “Ideally, tax preparation programs and LITCs will share information and discuss how best to make a referral.” For large, established, or year-round VITA sites, there is a decent chance these discussions are taking place. At other sites, that only have a reason to refer a select number of taxpayers each year, volunteers may be determining in real time how and where to refer the taxpayer. One possible solution is to require site coordinators to annually contact their nearest LITCs about referral procedures. Hopefully, taking this action would form an enduring yet informal partnership between the two organizations, with successful referrals being made in both directions.

VITA sites and LITCs each serve an important role in helping taxpayers meet their tax obligations. Because more complicated tax issues may surface during the tax return preparation process, it is important that the VITA volunteers are able to identify issues beyond scope and to know where to refer a taxpayer in this situation. Communication and training seem to be the key to remedying this problem. In order for taxpayers to fully benefit from these resources, the IRS would be wise to study strengthening the training materials and requiring site coordinators to contact their nearest LITCs so that an informal partnership is formed.

Filed Under: VITA Tagged With: ,

How a Low Income Tax Clinic Can Help You and Vice Versa

February 18, 2022 by 1 Comment

We are approaching the 50th anniversary of low income tax clinics (LITCs) which began in 1974 at Hofstra Law School.  Read more about the history here.  In addition, we are approaching the 25th anniversary of the jolt to the idea that propelled a ten-fold increase in the number of LITCs and brought them to communities across the country – IRC 7526 added to the Code as a part of the Restructuring and Reform Act of 1998 thanks to the testimony of Janet Spragens and Nina Olson.  So, LITCs are not a new thing but many tax practitioners still may not know how vital LITCs are to the operation of our tax system.  LITCs are vital, but because of current funding restraints are limited in what they can do.  This post seeks to explain the importance of LITCs and encourage practitioners not only to refer clients as appropriate but also to volunteer.

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Income Guidelines

LITCs represent individuals, not entities, who make less than 250% of the federal poverty guidelines and have a tax controversy with the IRS.  In 2022 that amount is $33,975 for a single person living alone.  If the household has more than one person, for each additional person in the house the dollar amount increases by $11,800 but the income of the additional household members must also be included in determining qualification.  For example, a family of four in which the father makes $22,000 and the mother makes $25,000 would qualify because the total household income is $47,000 and the family size of four means that the 250% of poverty level for the family is $69,375.  Each LITC questions incoming prospective clients to ascertain their income level, something not always straightforward, in making the decision on eligibility.  The statute also permits LITCs to represent up to 10% of their clients making an amount in excess of 250% of poverty – more on that later.

The income guidelines exist to ensure that LITCs represent individuals who would otherwise go unrepresented but also that LITCs do not compete for clients with attorneys, CPAs and enrolled agents.  For those tax professionals, understanding the limitations and practice areas of an LITC can provide a basis for making referrals to an LITC when an otherwise worthy client who lacks the means to pay for services can be served by an LITC at no cost, allowing the tax professional to triage someone with a problem and assist them by helping to place them in an LITC.

Scope of LITC Services

In addition to understanding the income qualifications of LITC clients, it is important to understand the type of work that LITCs do and don’t do.  LITCs do not exist to prepare tax returns or ITIN applications.  For free tax return preparation go to VITA. Many VITA sites also prepare ITIN applications as part of the tax return filing process.

LITCs exist to represent individuals in some type of tax controversy with the government, either in determining how much they owe or how much they can pay.  LITCs assist clients in audits, appeals, and Tax Court and other judicial fora in trying to find the right dollar amount owed for a specific year.

Once a liability is determined, LITCs help people navigate the very complicated tangle of laws, regulations, and agency practices to obtain relief from the IRS through such measures as a currently not collectible determination, an installment agreement, or an offer in compromise.  LITCs also assist clients in filing amended returns, audit reconsideration, and innocent spouse determinations when an assessed liability inappropriately puts the burden on a taxpayer.  Most taxpayers are not even aware of the multiple avenues for them to correct their or the IRS’s errors regarding their taxes. 

In general, the transition from VITA to LITC services will happen after a person has received a letter from the IRS about an issue. LITCs can consult with VITA preparers and their clients to figure out the best way to file a return, but LITCs generally cannot prepare the return or open a case for representation before the IRS has gotten involved. The intersection of LITC and VITA services is ripe for closer collaboration.

LITCs Play an Important Role in the Tax System

LITCs also help the IRS.  They facilitate an orderly and reliable resolution of many taxpayers’ problems by enabling taxpayers to file the correct forms with the correct offices and provide the IRS with the correct information necessary to resolve a problem.  By doing this LITCs reduce IRS workload and conserve IRS resources.

The reach of LITCs, however, is limited.  Each year LITCs apply for a grant funded by Congress and administered by an office within the National Taxpayer Advocate function of the IRS.  The total amount of grants that can be awarded is limited and the amount given to any one LITC has been capped at $100,000 since 1998.  Some movement exists to increase the grant to reflect the passage of time and the need to increase services as the IRS engages more and more with low income individuals, generating more and more tax controversy work with this part of the population.  The program office with the National Taxpayer Advocate that administers the grant takes the information it receives each year and produces a publication detailing the work of LITCs.  Here is a link to the most recent publication.

LITCs come in a variety of flavors.  The original LITCs formed as part of law school clinical programs and about 25% of LITCs still exist in that configuration.  In some ways, academic LITCs have the most freedom because they do not generally have geographical restrictions on case acceptance and they have directors who generally have a fair amount of tax experience.  These LITCs are best positioned to take on impact cases that push the law through litigation or comment on regulations and rulings impacting low income taxpayers.  Some clinics exist in independent organizations and many of these LITCs rely on pro bono assistance from tax professionals in their community.  A great example of this type of LITC is the Community Tax Law Project founded by Nina Olson in 1992 in Richmond, Virginia.  Most LITCs exist in legal services organizations around the country.  These organizations are natural hosts for LITCs because they already serve a variety of needs for civil legal services of community members, and the tax clinics round out the line-up of services to these clients.  Usually, LITCs in legal services organizations have geographical restrictions on client acceptance, may have other income restrictions over-laying IRC 7526, and some have other restrictions imposed by Congress.

LITCs can use 10% of their cases to find and push issues for clients who may make more than 250% of poverty but who do not have the ability to fund litigation in Tax Court, in the circuit courts or on to the Supreme Court.  LITCs can file amicus briefs in support of higher income individuals or entities moving forward with tax issues that impact the low income taxpayer community.  LITCs regularly comment on IRS regulations, new Tax Court Rules or other matters offered for comment because otherwise, low income taxpayers would have no voice in the formation of administrative or court rules that could greatly impact them.  The ABA Tax Section has been extremely supportive of LITCs and provides an excellent platform for making some of these comments.

Connecting with an LITC

The LITC Support Center is a new resource for both LITCs and tax professionals wishing to volunteer.  A project of the Center for Taxpayer Rights, the Support Center hosts weekly litigation strategy calls for LITCs and provides technical support and training for LITCs and their volunteers.  It also runs LITC Connect, a “dating app” for LITCs and tax professionals, whereby both LITCs and prospective volunteers create profiles.  When an LITC needs to find a volunteer for a particular case, or for technical advice, or for training, it can submit an Assistance Request and the algorithm identifies potential volunteers.  The Support Center reaches out to the volunteers and … voila! … with luck a match is made.  (FYI: the Support Center also has a “Resources for Taxpayers” page which includes helpful information and PDFs for taxpayers who are trying to navigate this filing season.)

You can find the LITC nearest you in Publication 4134.  In addition to finding their location, I encourage you to get to know the director of the LITC in order to find out how to best make referrals and, if desired, how to volunteer.  Invite the director to come and speak to your professional organization or a community event to explore the ways an LITC could best serve the community.  As we approach a couple of important anniversaries for LITCs, it’s time to get to know the one serving your community or to help bring one into your community if it is underserved.  LITCs provide a great resource for individuals who would otherwise face the tax system unrepresented.  Don’t overlook the ability of an LITC to assist you or you to assist it.

Filed Under: Center For Taxpayer Rights, Taxpayer advocate, VITA

Incorporating Voter Registration with VITA Services

May 17, 2021 by 8 Comments

Today’s guest post is from Vanessa Williamson and Jackson Gode. Vanessa is a Senior Fellow in Governance Studies at Brookings, and a Senior Fellow at the Urban-Brookings Tax Policy Center. Jackson, also at Brookings, is Research Analyst with the Governance Studies program. The post discusses interesting research showing how conducting voter registration drives at VITA sites prompted a significant number of previously unregistered voters to register and vote. As Vanessa and Jackson discuss, a recent Executive Order is obligating agency heads to consider how they can facilitate voter registration and participation. This post discusses a simple way IRS can assist. Les

By September 23rd, 2021, all federal agency heads are obligated by President Biden’s Executive Order 14019 to submit a plan to the White House outlining how their agencies can promote voter registration and participation. Our research suggests that, by incorporating voter registration into the Volunteer Income Tax Assistance (VITA) program, the IRS could assist millions of citizens in registering to vote or updating their registration. 

Such a program clearly falls within the mandate outlined in EO 14019. The executive order requires agencies to consider how they can “provide access to voter registration services… in the course of activities or services that directly engage with the public.” Each year, the IRS engages with over 150 million households when they submit income tax returns. Moreover, the executive order specifically calls for the consideration of “soliciting and facilitating approved, nonpartisan third-party organizations and State officials to provide voter registration services.” Through the VITA program, the IRS currently partners with hundreds of organizations across the country to provide free tax preparation services to low- and moderate-income households. Many organizations that participate locally in VITA, such as the United Way, already include voter registration in their missions.

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We know that voter registration at VITA is an effective approach because we have piloted the program in fifteen cities and eleven states, using a rigorous randomized, controlled approach to measure not just how many people the program would register to vote, but how many people registered at VITA would not otherwise be registered. In 2018, we found that offering voter registration opportunities to VITA clients doubled the likelihood of an unregistered person registering to vote. Our findings also showed that clients who registered at VITA sites were more likely to turnout during the election.

Through our pilot programs, we’ve found that adding voter registration can be a seamless step in the VITA process. The sites we partnered with typically found it easiest to add voter registration to the intake process. In addition to offering clients the standard VITA intake packet (Form 13614-C) and any site-specific materials, intake volunteers alert clients that they can register or re-register to vote, and provide them a voter registration form. Filling out a voter registration form is simple. It takes an average of two minutes to complete. After filling out the form, clients simply return it, along with the rest of their materials, to VITA volunteers. Organized in this way, voter registration does not slow down tax preparation; instead, the voter registration form can give clients something to do as they wait their turn for an available tax preparer. The site then submits registration forms to the appropriate county clerk’s office in accordance with local law.  

The IRS has a number of options if it were to scale this pilot program. The most effective strategy to implement voter registration at VITA sites would be for the IRS to mandate that all organizations participating in the VITA program offer voter registration to their clients and submit the completed forms in accordance with local law. The IRS could also provide sites with the necessary materials, including copies of the National Mail Voter Registration Form, which also provides state-specific guidance. We believe that this approach would register around 115,000 voters a year.

Short of a mandate, the IRS could simply encourage VITA sites to add voter registration to their work. At a bare minimum, the IRS needs to provide clear guidance that VITA sites are legally allowed to add voter registration to their tax preparation services. In our research, we have on several occasions found that site coordinators wrongly believed that voter registration is a political activity, and therefore that they could not provide voter registration to their clients. VITA organizations we have worked with have requested, and received, clarification on this point from the IRS, but a clear communication to all VITA organizations would go a long way in reassuring potential VITA participants that they can help their clients register to vote. 

VITA-based voter registration has the potential to be exceptionally effective in registering voters. First, the VITA program reaches a lower-income population that tends to be under-registered. Second, by collecting and submitting paper forms, VITA sites can ensure that their clients actually get registered to vote. Collection is crucial to effective voter registration programs. As President Biden has stated, “it is the duty of Federal, State, and local governments to promote the exercise of the fundamental right to vote.” It would be a shame if the result of the executive order were nothing more than a neglected link at the bottom of irs.gov. Instead, we hope that the Treasury Department will consider the unique role the IRS VITA program can play in assisting tax filers in registering to vote.

Filed Under: VITA

TIGTA Report on VITA Errors

November 6, 2013 by 1 Comment

This week, TIGTA released a report detailing errors it has found following a mystery shopping study at VITA sites last filing season. The study indicated that of the 39 tax returns prepared for auditors, 20 (or 51 percent) were correct, while 19 (or 49 percent) were prepared incorrectly. While the study is not statistically significant, the mystery shopper approach and TIGTA studies on accuracy of return preparation have received lots of attention lately. They have come up in connection with the Loving case, for example. IRS and those who favor regulating return preparers point to prior studies of commercial preparers that showed unlicensed preparers making errors; counsel for Loving has pointed to prior TIGTA studies showing errors at VITA sites as suggestive that competency testing may not achieve the IRS’s objective of increased return accuracy; after all VITA volunteers must pass a test to be able to prepare returns for free.

There is lots out there already discussing the report, and IRS response to the report. (See for example Accounting Today, which has a small piece discussing the findings and an IRS response). I write to highlight a few parts of the report, including its suggestion that more systematic use of a checklist when getting information from taxpayers would likely reduce errors.

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According to TIGTA, the errors actually resulted in a net overpayment to the IRS; as the volunteers in a number of instances failed to claim appropriate business deductions on a Schedule C, educator expense deductions and retirement credits. Summing it up, TIGTA states that if the 19 incorrect returns had actually been filed, 11 taxpayers would not have received refunds to which they were entitled; and 5 would have owed more in tax or penalties than they otherwise should have owed if the returns were accurate (the other 3 would have received too high a refund or paid too little in tax).

Some issues that have a general high rate of error among self-prepared and commercially prepared returns had a high accuracy rate in this study. For example, in Appendix V of the report, TIGTA indicated that the VITA volunteers had an 85% accuracy rate on the EITC. Child tax credit accuracy and dependency exemption accuracy rates were 92%.

TIGTA’s recommendations focused on ensuring that volunteers appropriately gathered information from taxpayers and that there was a sufficient quality review in place.  In highlighting problems with the information gathering and quality review, TIGTA suggested that volunteer training in those areas was not mandatory, and that additional training and emphasis in interviewing and quality review may have been helpful in reducing errors:

In addition, the IRS created a training document with detailed guidance on the IRS’s intake/interview and quality review processes. However, the IRS encourages but does not require volunteer return preparers and quality reviewers to complete this training, nor does the IRS require site coordinators to complete training on the intake/interview and quality review guidelines. Considering the number of volunteers and quality reviewers who did not follow the IRS guidelines and that most of the errors would not have been made or would have been detected had the guidelines been followed, site coordinators should be required to complete training on these processes. Site coordinators are responsible for overseeing the volunteers’ work and should have a full understanding of the requirements to ensure that volunteers preparing tax returns and performing quality reviews follow the guidelines.

I am a big proponent of uniform approaches to ensuring quality across the board. A book The Checklist Manifesto by Atul Gawande nicely illustrates how checklists can reduce errors in a wide range of activities, including medicine and construction. The essential point in the book is that humans are fallible when it comes to ensuring that they are doing all they are supposed to do; simple checklists go a long way in improving accuracy in outcomes. Likewise, more definitive and specific due diligence obligations such as that in place with the EITC can improve compliance. Questions in checklists can force taxpayers and preparers to confront issues systematically and reduce the odds that preparers overlook important information. Visibility and accountability often drive compliance.

There are many ways to make the process more visible and accountable. Often, there are costs associated with visibility and accountability (including higher prep fes), but those costs must be weighed in relation to likely reduced errors. I will look more specifically at the EITC due diligence rules in a subsequent post.

 

Filed Under: VITA