Prosperity Now Announces New Tax Time Research Partnership with H&R Block

On Thursday, February 7, Prosperity Now and Tax Credits for Workers and Their Families, with the support of H&R Block, hosted What's Next for the EITC: Strengthening the Tax Code for Working Families on Capitol Hill. At the event, Prosperity Now shared our exciting new partnership with H&R Block to examine the role of financial products and services in the lives of low- and moderate-income tax filers during tax time.

In addition, keynote speakers Senator Sherrod Brown (D-OH) and Representative Bonnie Watson Coleman (D-NJ-12) joined tax policy experts, advocates and community tax preparers to examine the future of the tax code in light of recent challenges posed by the partial government shutdown and IRS budget cuts. They explored opportunities for improving vital anti-poverty programs, such as the EITC, in the new Congress.

Here are key takeaways from the event.

A New Research and Policy Partnership to Advance Tax Time for Working Families

Each year, millions of working families rely on their tax refunds to provide a significant financial cushion, boosting their annual income by 30 percent in some cases. The Earned Income Tax Credit (EITC), often a big part of these refunds, is one of America’s most effective anti-poverty tools.

But this year, families face more challenges than ever in receiving these tax refunds in a timely, safe and efficient manner. These challenges include the recent partial government shutdown, resource constraints at the IRS, first-year filing under the new tax law and the annual delays in processing EITC tax refunds due the PATH Act.

In this environment, tax preparation services and related financial products play an even larger role than usual in the delivery of important tax credits like the EITC and tax refunds overall. Volunteer Income Tax Assistance (VITA) sites, along with commercial providers, help millions of low- and moderate-income tax filers accurately prepare and file tax returns. They also provide access to a myriad of financial products from refund anticipation checks or loans, to bank accounts and prepaid card accounts.

To better understand the role that various financial products and services play in the lives of working families around tax time during this critical moment, Prosperity Now’s David Newville and H&R Block’s Dan Turrentine announced an innovative new research partnership to be deployed over the next tax season. This research will focus on what financial products and services low- and moderate-income families are currently using and how they impact their financial stability year-round.

In this work, the two organizations will be inviting preeminent researchers, thinkers and practitioners to help shape the research questions in a qualitative study to be fielded in 2020. Through this process, we will better understand the challenges and opportunities presented by these products and services, their impact on the financial lives of these families and related policy implications. This work will further our understanding of how policymakers and tax professionals can best help families safety navigate and maximize the tremendous opportunity provided each year at tax time. You’ll be hearing more about this research as it develops over the next year. Stay tuned for updates.

Opportunities to Improve Tax Time for Working Families in the New Congress

In addition to the discussion of our new partnership, the event speakers—including Samuel Hammond of the Niskanen Center, Betty Habershon of Prince George’s CASH Campaign, Elaine Maag of the Urban-Brookings Tax Policy Center and Daniel Turrentine of H&R Blockdiscussed opportunities to better support working families through the tax code: expanding EITC eligibility to workers not raising children, helping low-income families access free tax preparation services such as VITA, enacting minimum competency standards for paid tax preparers, expanding the CTC (Child Tax Credit) to low-income families and enacting legislation to help families to save a portion of their tax refunds for a rainy day.

One promising legislation discussed was the bipartisan Refund to Rainy Day Savings Act, introduced in the last Congress by Senators Cory Booker (D-NJ), Tom Cotton (R-AR), Heidi Heitkamp (D-ND) and Todd Young (R-IN). This bill would allow working households to defer 20 percent of their tax refund into a Treasury account that would gain interest before being directly deposited into their personal account six months later. The legislation would also establish a pilot program to gauge the impact of matching funds with lower-income tax filers. Lastly, the bill would expand the flexibility of the innovative AFI (Assets for Independence) program, which offers matching funds and other incentives to help low-income workers save their own money and build assets.

In her remarks, Representative Watson Coleman touted the importance of EITC, “Unlike trickle-down economics and corporate handouts, the EITC is a tested and proven method to help families build savings for a rainy day. When we expanded the EITC, poverty decreased, the health of mothers and infants improved and even educational outcomes improved.”

Panelists urged policymakers to consider expanding the EITC for taxpayers without dependent children. Currently, the maximum EITC for childless workers is only $519, while those with two children can claim up to $5,716. Expanding the EITC for workers without dependent children would lift roughly 700,000 Americans out of poverty, according to the Urban-Brookings Tax Policy Center.

Senator Brown also highlighted the need to expand the EITC for workers without dependent children and stressed the importance of advocacy to the audience, “In 2015, we expanded the EITC to give millions a better life, and this was only possible through organizing,” he said. “This is a time when we can fight back for struggling American families as corporate riches have reached new heights.

Overall, the panelists agreed that despite the changing environment, there are a lot of exciting opportunities on tax policy and administration coming up in 2019, including the new tax time research project. We look forward to keeping you engaged in the upcoming year.

For those of you who missed our What’s Next for the EITC event, you can check out the video as well as our event resource page. We look forward to seeing you at our next event!

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