Does VITA Improve Access to Financial Capability Services at Tax Time?

As the sun sets on the first filing season since the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, it is important to pay attention to how programs and resources help these households use the tax moment to strengthen their household financial capability and security. 

The Volunteer Income Tax Assistance (VITA) program has been around for 50 years, providing free tax preparation services to those who can least afford to pay for it. VITA programs help low-income taxpayers maximize their tax refunds and capitalize on tax time to manage income volatility and achieve financial goals. 

Operating VITA sites is often just one component of an organization’s strategy to help families achieve financial stability and prosperity. Many programs also either directly or indirectly provide additional resources and services to help their clients maximize their tax refunds, save for emergencies and plan for the future. Tax time financial capability services offered at VITA sites include activities such as encouraging taxpayers to save a portion of their refund, inviting participation in incentivized refund savings programs, free credit reviews and making direct referrals to financial coaching.

In 2015, with support from the W.K. Kellogg Foundation, Prosperity Now’s Taxpayer Opportunity Network (TON) began exploring the role and impact of VITA programs in helping taxpayers access financial capability services at tax time. Today, we release the full report detailing our findings.   

Several themes emerged from our research:

  1. VITA is a financial capability service. Often overlooked as a financial capability service in and of itself, we sometimes forget that VITA is seldom a stand-alone service. It is more often part of a suite of financial capability services being offered through a local partner organization.
  2. Layering is good. The tax time moment is indeed a viable opportunity for layering other beneficial services that build the financial capability and financial well-being of thousands of households.
  3. There can be a trade-off between preparing more returns and creating connections. The need to prepare more returns often overshadows a program’s desires and intentions to connect clients with other services that could contribute to improved financial well-being outcomes.  
  4. There’s no grading scale. The current mechanism for measuring savings behavior, based on the number of people who elect to split their tax refund, is inadequate. There’s no standard measure of success for programs integrating financial capability services at tax time.

TON is leading efforts to more effectively document and understand taxpayer savings behaviors and overall financial well-being. However, improving financial well-being doesn’t start and stop with saving a part of the tax refund. In addition to understanding savings behaviors, we need to understand the impact of the multitudinous ways in which VITA clients are increasing their financial capability at tax time. These may include paying down debt, connecting to public benefits, making human and direct capital investments (such as car repairs to get to and from work) and increases in knowledge about their tax return, tax reform and how their household is affected by the tax code. 

It is also important to note that recent legislation introduced in Congress would codify VITA into law and improve the value of and access to key tax credits.

As a VITA volunteer, I have witnessed the impact of helping low-income families overcome the sometimes overwhelming challenge of filing their tax return. I have heard first-hand how the information and resources I provided in one filing season had a positive impact on their lives and overall financial well-being. 

I could go on for days about the wonderful clients I see year after year, but I’ll encourage you to become a VITA volunteer so you can see for yourself. And be sure to contact your members of Congress and ask them to support legislation that will help improve the financial well-being of the clients you’ll meet when you volunteer next year.

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