Sometimes, the best of intentions can have the worst of consequences. That outcome seems to be the fate of the community organizers of ACORN and their efforts to assist low-income taxpayers file their tax returns.
As the result of a sting operation
showing ACORN representatives giving false tax information to undercover activists posing as a prostitute and a pimp, the organization risks losing its funding for vital services that it provides to the low-income tax community.
Many have written about the scandal involving the video showing ACORN representatives recommending, among other things, that the couple posing as a prostitute and pimp claim to be "performance artists" on their tax return and that they understate their income for tax purposes.
I'd like to just focus on the tax piece of that story. Among its many activities, ACORN provides assistance to low-income taxpayers through the IRS' Volunteer Income Tax Assistance (VITA) program. The IRS has long supported the provision of free taxpayer services through organizations such as ACORN. V
olunteers working through various organizations via the VITA program prepared 2.8 million tax returns, or 2 percent of the 124 million individual returns, filed during the 2009 tax season. ACORN -- Association of Community Organizations for Reform Now -- is one of the fastest growing of these volunteer organization
s. It operates in 80 cities and, according to its Web site, has helped 42,000 families claim more than $46 million in tax refunds, including more than $28 million in earned income and child tax credits.
But, ACORN's ability to provide these services is now in jeopardy. On Sept. 15, three Republican congressmen -- John Boehner of Ohio, Eric Cantor of Virginia and Dave Camp of Michigan -- wrote to IRS Commissioner Douglas Shulman, requesting that the IRS sever all ties with the organization following the undercover investigation of ACORN's taxpayer assistance services. Rep. Charles W. Boustany Jr. (R-La.) has also requested a hearing to "investigate ACORN's activities in providing tax advice and tax preparation services."
Here's the problem.
Taxpayers who benefit from ACORN's free tax preparation services do not have much money. In the case of most VITA centers, those seeking free taxpayer assistance must earn under $40,000 a year. That's not a lot of money. And, as a result, someone helping a low-income taxpayer will try to find as many tax benefits as possible.
The tax code is increasingly filled with benefits, such as the earned income tax credit, the child credit, and the education credit, that once were provided as direct payments to those eligible. And, while the tax code is a very efficient way to provide benefits, the benefits are paid only to those who file a tax return. And, filing a tax return can be a nightmare.
Moreover, many low-income taxpayers are not aware that they must file a tax return to receive these benefits. The volunteer income tax preparers have largely stepped up to inform the low-income population of these benefits. Telling the taxpayer that these benefits exist is one of the main benefits of the VITA program. The VITA volunteers go through a rigorous training program before becoming certified to provide assistance.
But, here's where the tension arises.
At a time when the economy is in recession, there is a temptation to stretch the limit and make a false representation on the tax form to increase the tax benefit. As an example, a taxpayer may increase the amount of earned income tax credit if a child is living with the taxpayer for more than half the year. Suppose the parents are divorced and the child splits time between the two parents. In this case, the parent may still claim the EITC for a single person with a child, which is larger than the EITC for a single person with no children, but only if the child lives with the taxpayer for more than half the year. If the child lives with the parent for just six months, then the taxpayer is out of luck -- even if that taxpayer pays child support, he or she may not claim the EITC.
The taxpayer assistant asks for exact details on how often the child is with the taxpayer and if she learns that the child is, in fact, with the taxpayer for more than half the year, then the taxpayer is eligible for the larger EITC.
That is the way the VITA program is supposed to work.
The ACORN scandal demonstrates the program doesn't always work that way.
I took a tax preparation course and passed the IRS's volunteer income tax assistance test to become eligible to provide free tax assistance, which I did through Community Tax Aid during the 2008 tax season. My first day on the job was at D.C. Delegate Eleanor Holmes Norton's annual D.C. Tax Fair.
For most people, the prospect of filing a tax return is a fearful experience, with many taxpayers afraid that they will make a mistake and then be audited by the IRS. For this reason, many low-income taxpayers don't file at all, and as a result don't get any of the various tax benefits to which they may be entitled. This is a shame. By failing to file a tax return they fail to claim up to $12 billion in Earned Income Tax Credit benefits for which they are eligible. The IRS estimates that 20 to 25 percent of eligible taxpayers fail to claim the credit.
In a case of a single parent with shared custody, it would have been easy to have checked a box that would have increased the taxpayer's refund on the knowledge that "no one would find out." But, that would have been wrong. I always advised the taxpayer of the law and what the law allowed. If the taxpayer did not meet the eligibility requirements, then as much as I knew the taxpayer would have benefitted from the tax break, I could not make that statement. That was the right thing to do and the right action for the taxpayer to take.
One expects the vast majority of ACORN's volunteer tax preparers followed the rules. By allowing its volunteers to assist people, the taxpaying community trusts that ACORN has the best interests of the low-income taxpayer at heart.
How disappointing to find that some of ACORN's representatives violated that trust.
Our tax system relies on voluntary compliance. There is no place for organizations that encourage non-compliance, no matter how noble their intentions.
It now appears that ACORN may lose its privilege of providing free tax assistance to this needy community. A very large community will suffer as a result. Is this the right action?
The old saying is that "with friends like this, who needs enemies." Unfortunately, ACORN's willful abuse of the trust of the taxpayer is difficult to tolerate, and the organization may no longer be the friend of the low-income taxpayer. The adverse publicity surrounding the actions of a few ACORN representatives risks putting an entire program that greatly benefits the low-income community in jeopardy. It may not be time to cut the ties, but it is time to take a closer look at the nature of the taxpayer assistance that ACORN offers the community.