Increasing Access to Free Tax Preparation in New York City

When Cynthia went to the free tax preparation site near her house, it was difficult to convince her to take advantage of the services being offered. Cynthia was adamant about using a paid preparer who advertised a $50 bonus. She didn’t trust “free,” and she thought the paid preparer would provide better service. But a couple of days later Cynthia came back to the free tax prep site. She was angry. It turned out the $50 bonus that the paid preparer had advertised came with $600 in fees. Now she’s an advocate for the City’s free tax preparation services, and has referred friends and family members as well.

In her words, “A bonus can cost you!”

According to Internal Revenue Service (IRS) data, New Yorkers claimed the Earned Income Tax Credit (EITC) for a cumulative $2.5 billion in refunds. The EITC—one of the greatest tools we have for fighting poverty—gives families and individual tax filers with low- or moderate-incomes sizeable refunds, depending on income level and number of dependents. Research shows that the EITC returns an average of $2,500 to eligible filers in New York City—a significant cash infusion for low-income families. More often than not, a tax refund check is the largest single check these families receive all year. In New York City, most EITC-eligible people are also eligible for free tax preparation through the Volunteer Income Tax Assistance (VITA) network, but fewer than 5 percent take advantage of it. Where are the other 95 percent? And why would anyone opt to spend hundreds of dollars for something that is offered for free at nearly 200 VITA sites citywide?

Clearly there needs to be an improved process for tax filing.

The NYC Department of Consumer Affairs (DCA) Office of Financial Empowerment has joined forces with Parsons Design for Social Innovation and Sustainability (DESIS) Lab, the Center for Economic Opportunity (CEO), Food Bank For New York City, Citi Community Development, and Mayor’s Fund to Advance New York City—to create a new approach to free tax preparation services in New York City. It’s called Designing for Financial Empowerment.

The initiative is composed of three phases: discovery, during which the research team was embedded in the VITA sites and interviewed community members and stakeholders; co-design, where the research team collaborates with users, service providers, government officials, funders, and others to generate ideas to address VITA challenges; and iterative prototyping, in which one or multiple solutions will be rapidly tested at the VITA sites and revised based on user responses.

Read the full blog post on talkpoverty.org here.