This year, when the taxman visits New Haven, he might bring with him up to $5 million in tax credits for low income residents.
The Family Asset Building Project is providing free tax preparation assistance to low income families and educating them about the earned-income credit. In the future, the program will help these families build their assets and improve their financial opportunities.
Rob Smuts ’01, a policy researcher for Mayor John DeStefano Jr., said the program will give people the opportunities they would otherwise be denied and help low income city residents “achieve the stereotypical American dream.”
Smuts said the project involved general educational outreach and free tax preparation assistance. As part of the outreach process, all New Haven school children brought notices home to their parents, ministers shared information with their congregations, and Yale informed its employees.
“We got the word out to a good deal of people,” Smuts said.
Volunteer income tax assistance has been available at sites throughout New Haven since the end of January. Smuts said this should help low income residents maximize any money they receive back from the government because they will not have to depend on the often expensive commercial tax preparation companies. The city is working on the project with non-profit groups including Community Action Agency of New Haven and Student Health Outreach of New Haven-Yale.
Some Yale students volunteered for the program and were trained and certified by the IRS, said Sophie Raseman ’04, a policy analyst for the city and a Dwight Hall urban fellow. Raseman said more volunteers for the program would be welcomed both this year and next year.
The program places special emphasis on the earned-income credit or EIC. According to the IRS, the EIC is designed to decrease the tax burden of people who work but earn less than $34,178. It acts as a supplement to wages and encourages people to work instead of joining the welfare rolls. A press release from the Mayor’s Office estimated that increased enrollment in the program could bring up to $5 million more to low income city residents each year.
Smuts said the city plans to use integrated projects in upcoming years “to build wealth among working class families.” He said it makes sense to tie the asset building program in with the tax preparation help because the EIC may help people make up lost ground and pay off their debts or build a foundation for savings in the future.
“We’re really in the starting phases of pulling all the pieces together,” Smuts said.
One way the city is considering helping residents build assets is through independent development accounts known as IDAs, Smuts said. Families will first be required to take a financial literacy class, where they will learn basic financial planning skills. The families will be able to invest in these special accounts, for which the city will provide one-to-one matching funds. The accounts can be used to save for homeownership, education, or starting a business. The Community Action Agency currently has an IDA pilot program, which Smuts said may be used as a model for next year’s program.