Volunteer Income Tax Assistance Program (VITA)
The Volunteer Income Tax Assistance program (VITA) is designed to help low-income taxpayers file their taxes each year. Filing ones taxes can be a tedious and complicated process, sometimes requiring expertise beyond what the layperson can understand. While wealthier Americans can turn to paid professional tax preparers or computer software to help, low-income individuals and families may not have the financial resources to use those options or would have to give up a substantial portion of their refund in preparation fees. VITA was created to provide a free service to low-income persons to quickly and easily file their taxes. The program is overseen by the Internal Revenue Service (IRS).
In addition to providing a free service for low-income taxpayers (generally households making below $52,000), VITA makes sure low-income taxpayers take advantage of all the benefits the tax code provides them. The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are refundable tax credits that can provide substantial refunds for those who qualify. In fact, many times low-income workers receive their largest paycheck of the year via the EITC and CTC. As a result, these credits have proven quite successful at lifting and keeping people out of poverty. Unfortunately, many workers are not aware of these credits or make a mistake in claiming them, which can reduce or eliminate their earned refund. VITA helps remedy this problem by having trained personnel to prepare their taxes. In 2011, VITA helped process nearly 700,000 EITC tax returns with total EITC refunds exceeding $1 billion.
VITA programs are run all over the United States during tax season, generally late January through mid-April. Local organizations (e.g. the United Way, AARP, etc.) can apply for matching funds from the IRS to operate their program. Although programs vary from city to city, programs are generally run by volunteers who carry out the various tax preparation duties. Volunteer tax preparers receive intense training on the tax code and tax software used to file returns. These volunteers must be certified each year by passing standardized test on basic tax law before they may begin preparing tax returns for VITA clients. In addition to tax preparation, many VITA sites also provide asset building services by helping clients open up checking and savings accounts, purchase U.S. savings bonds, invest in retirement savings, or obtain basic financial education. These services help low-income families gain the tools and resources they need to climb the economic ladder.
Despite offering these important services, like many federal programs, VITA is dramatically underfunded. The IRS made 213 grants to VITA programs around the country for tax preparation for the 2011 tax season. Congress allocated $12 million for the VITA Grant Program in 2011, which is an increase from several years ago but still well below what is needed to meet demand. To address this shortfall, Sen. Sherrod Brown (D-OH) and Rep. Mike Honda (D-CA-15) have introduced the Volunteer Income Tax Assistance (VITA) Act in both the House and Senate (S.1368 and H.R.341). This bill would authorize $30 million annually toward VITA services and remove program spending restrictions to allow more funds to be spent on operations, outreach, and asset development services.