Creating a win-win way to provide free tax help: Bethel University and AccountAbility Minnesota share lessons learned
In a mutually beneficial partnership between Bethel University and AccountAbility Minnesota, accounting students provide free tax preparation assistance to low- and moderate-income workers.
Leo T. Gabriel - Professor of Business, Bethel University
Published January 1, 2008 | January 2008 issue
The Earned Income Tax Credit (EITC), which provides a refundable tax credit for low-income workers, is the nation's largest antipoverty program. Claiming the EITC and other federal or state credits may increase a working family's income by as much as 50 percent.1/ Unfortunately, up to 25 percent of eligible workers fail to claim the EITC. That millions of working families are missing an opportunity to increase their incomes is good reason for Certified Public Accountants (CPA), business professionals, and accounting students to get involved with the Internal Revenue Service (IRS) Volunteer Income Tax Assistance (VITA) program. VITA sites offer free tax preparation assistance to low-income families who are not able to prepare their own tax returns. (For more on VITA sites and other tax preparation assistance programs, see the sidebar below.)
Bethel University (Bethel), a private college in Arden Hills, Minn., has found that collaborating with AccountAbility Minnesota (AAM) to provide VITA services is beneficial for both organizations. AAM is a nonprofit organization dedicated to providing tax preparation and accounting services to individuals and small businesses that have limited resources. Every year, AAM operates approximately 15 community-based VITA sites throughout the Twin Cities metropolitan area. Support from a multitude of partners helps make it all possible. Bethel is just one of many organizations collaborating with AAM to assist working families.
A win-win situation
AAM benefits from its collaboration with Bethel by using university resources to support its tax assistance program. While AAM has used Bethel classrooms, computers, and professors for training volunteers, the primary resource has been a consistent supply of student workers. Each year, approximately 30 accounting students from Bethel work at AAM-sponsored VITA sites as tax preparers.
The collaboration with AAM enables Bethel to avoid the overhead and duplication of effort required to operate a separate VITA program. But primarily, the benefit to Bethel has been enhanced student learning through experiential education. Through their experiences at the VITA sites, students learn taxation for a practical and immediate reason: to prepare tax returns for low-income families. There is more at stake than a grade in a course. Failure to master tax laws may mean short-changing a family out of needed income. Students understand the seriousness of their tax preparation services and respond accordingly.
Bethel and AAM have learned valuable lessons in the seven years they've worked together. Above all, they've learned that the best type of collaboration creates a "win-win" situation for both parties. Listed below are some best practices that may help other academic and nonprofit organizations with an interest in the VITA program create win-win collaborations of their own.
Make tax prep part of the curriculum. A VITA site collaboration between a university and a nonprofit organization works well if the tax assistance provided by students is part of the university's accounting curriculum. For accounting students at Bethel, providing tax assistance is not an optional activity. Students must help at a tax preparation site as part of a required federal taxation course that is offered every spring. There is built-in accountability when the tax assistance is part of students' coursework. At the AAM tax sites, Bethel students learn how to apply tax laws, conduct research, prepare tax returns, and work with clients. They are required to record their learning in a journal, which is evaluated as a part of their grade for the course.
Have professors lend a hand. Bringing tax professors from the university into the operations of the tax assistance program enriches the collaboration. Bethel professors have served as tax preparers, reviewers, and trainers for AAM. There is a practical reason for having professors involved with the tax program's operations: it provides a basis for understanding AAM's operating environment and directing students who will work at the tax sites.
The operation of an AAM tax site is far different from that of a CPA firm. AAM sites serve large numbers of clients daily and are staffed by multiple volunteers. Each has a specific role, such as greeting clients, preparing tax returns, or reviewing the returns for accuracy. The environment is less than tranquil and serene. By witnessing the high level of activity firsthand, tax professors gain experience that helps them mentor and prepare students who are VITA site bound.
Use classroom visits to clarify expectations. Bringing staff from AAM into the tax classroom at Bethel strengthens the collaboration. During a classroom visit, AAM representatives can efficiently attend to logistics, such as signing up students to work and handing out directions to the tax sites. More important, AAM staff members use classroom visits as an opportunity to explain the VITA program and AAM's expectations for student workers. AAM stresses that students should view their VITA work as a professional responsibility. As professionals, students are expected to arrive on time, stay for the length of time scheduled, perform duties within their scope of training and experience, and treat clients with courtesy and respect.
AAM staff members also use classroom visits to provide students with VITA's privacy and confidentiality guidelines. For example, students are warned not to share client information with other people or remove a client's documentation from the tax site.
Teach students about relevant tax laws. Educating students on federal and state tax laws that are relevant to the population being served is crucial. Bethel dedicates the first two weeks of its required tax course to preparing students for their work at the AAM sites. The instruction covers taxable income, filing status, dependency exemptions, and tax credits. Extra time is devoted to the EITC, which is a complex credit. Students also learn about the tax documents (W2s, 1099s, Social Security Statements, etc.) that they will encounter. In addition, students learn to use the TaxWise software that is installed at AAM's sites. To demonstrate their mastery of the relevant tax laws, students must complete an IRS certification test prior to volunteering for AAM.
Provide diversity education. Education on cross-cultural communication is important for the Bethel-AAM partnership. Many Bethel students come from communities where they have little exposure to people of color and low-income families. Bethel's VITA volunteers receive diversity education to increase their understanding of cultural differences. In addition to adopting guidelines that AAM provides, students learn a model of appropriate cross-cultural communication that calls for demonstrating openness to others, communicating respect for others, building trust with others, learning how to seek information, understanding from the perspective of others, and serving from the perspective of others.2/
Strike a balance between learning and serving. Students need to work a sufficient number of hours as tax preparers for the collaboration to be effective. There is a learning curve when preparing tax returns, which varies depending on the student. It takes time to learn how the tax site operates, how to work well with clients, and how to become proficient tax preparers. It's best for the collaboration if students work enough hours so they can learn to effectively serve AAM clients, but not so many hours that the experience no longer adds to their knowledge base. A sufficient number of student hours is somewhere between 25 and 40. This range strikes a balance between learning (Bethel's primary objective) and serving (AAM's primary objective).
Benefits for the broader community
The collaboration between AAM and Bethel takes time, effort, and coordination. The short-term benefits are enhanced learning for Bethel students and better tax outcomes for low-income families. There are longer-term benefits as well. In 2007, Bethel students and other VITA volunteers helped more than 14,000 Minnesota clients receive $19.9 million in tax refunds. A portion of those refunds was spent on goods and services in the clients' neighborhoods, which strengthened the local economy.
Also, by providing pro bono services through AAM, students see how the accounting profession can serve the public interest. After graduating from Bethel, students have continued to work with AAM as volunteers, employees, and board members. Their continued interest in AAM suggests that public service will remain a core value of their accounting careers.
In other words, in the win-win collaboration between Bethel and AAM, it appears that the broader community wins, too.
Leo T. Gabriel is an associate professor of business at Bethel University.
Free tax preparation assistance (FTPA) is a catch-all term for a variety of programs that help people prepare and file their tax returns free of charge. The assistance is provided by trained volunteers who ensure that tax returns are filed correctly so clients will receive all the credits and refunds they deserve. Government agencies or nonprofit organizations sponsor the programs, often in partnership with local community coalitions or financial institutions.
The use of FTPA minimizes errors and saves filers money they would otherwise spend on fees at a for-profit tax preparation firm. In addition, FTPA prevents filers from taking out costly refund anticipation loans, or RALs. With a RAL, a for-profit tax preparation firm charges high fees and interest to provide an advance on a taxpayer's refund. The charges can significantly reduce a filer's net tax benefit.
FTPA is delivered every tax season at convenient locations such as senior centers, shopping malls, libraries, and schools. Most sites operate from February 1 through April 15. In addition to providing tax preparation help, sites may offer clients free information on saving, investing, and money management. Some sites that are affiliated with financial institutions give "unbanked" clients the option of opening checking or savings accounts at the same time that they file their tax returns, so they can have their refunds deposited directly, quickly, and securely.
Sponsors of FTPA programs welcome support from the community. Individuals can help by volunteering at FTPA sites. Volunteers who receive training can help prepare tax returns; others can assist with site intake and coordination. Companies and nonprofit organizations can help by informing their clientele about the free services available, hosting a tax preparation site, or encouraging their employees to volunteer. Individuals and organizations that participate in FTPA efforts benefit from the knowledge that they're providing a public service, strengthening their ties to the community, and returning money to the local economy. For financial institutions that get involved, there could be an added benefit. Banks that participate in providing free tax preparation may receive favorable consideration under the Community Reinvestment Act regulations. *
The Internal Revenue Service (IRS) sponsors most of the FTPA sites in the U.S. In some urban areas, nonprofit organizations provide FTPA that is unaffiliated with IRS programs. State governments are often involved in some aspects of free tax preparation, too, such as disseminating information about free services or hosting tax preparation sites.
Prominent FTPA-related resources are listed below. Readers with an interest in promoting FTPA efforts are encouraged to contact these organizations.
Ninth District state-specific resources
Resources for Native communities
The Native Financial Education Coalition (NFEC), which is coordinated by First Nations Oweesta Corporation, is leading an effort to promote and expand free tax preparation, EITC awareness, and asset building opportunities in Native communities. The NFEC's EITC Network provides FTPA-related outreach materials, peer networking, and data collection and dissemination. For details, visit www.oweesta.org/eitc. The network's organizers have compiled an inventory of FTPA sites in Native communities. Nearly 30 of them are located in the Ninth District. For additional information or to have your site added to the inventory, contact Patsy Schramm, NFEC EITC network coordinator, at firstname.lastname@example.org, or 706-865-7079.
* The Community Reinvestment Act (CRA) encourages financial institutions to meet the credit needs of their local communities, with special emphasis on low- and moderate-income neighborhoods. A financial institution should consult with its federal banking regulator to determine if its FTPA-related activities are eligible for CRA consideration.
1/ AccountAbility Minnesota, 2005.
2/ This model is adapted from Duane Elmer, Cross-Cultural Servanthood, Inter-Varsity Press, 2006.