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United Way's New Financial Education Website

My Smart Money, United Way's new financial education website, launches Nov. 16, 2016, thanks to the generous funding provided by the Suntrust Foundation.

It's a free, easy way to get a clearer picture of one's financial situation, and offers simple, useful tips and tools to help all of us get smarter about our money.

My Smart Money uses the principles of "just in time" education to provide comprehensive, specific information that helps users take action to address their problem or plan for the future.

 

Refund Delay - Maybe Not Such a Bad Idea?

The IRS recently announced that 2016 tax refunds that include the Earned Income Tax Credit (EITC) and/or the additional Child Tax Credit (CTC) will not be issued before February 15, 2017. The refund delay is required by law — the PATH Act, to be precise.

The idea of the delay is to give the IRS extra time to verify the identity of early filers and make sure that the right refund is going to the right taxpayer. This could be an improvement for many families claiming the EITC/CTC and help avoid the “first come, first served” approach to these child-related refunds. And doesn’t heading off identity theft problems early in the season sound like a step in the right direction?

At this time, it is not clear exactly how IRS will use the extra time. It appears that:

  • IRS will run the usual fraud filters to detect identity theft — hopefully much improved filters that will avoid the high number of false positives reported in the Taxpayer Advocate’s mid-year report. The timing of this scrutiny is unclear, but presumably this step could occur as soon as a return is filed.
  • Tax year 2016 W-2s have an accelerated due date — due to the government by January 31, 2017, a month earlier than in years past. That means that IRS will have W-2 data to run against the tax returns of early filers and perhaps discover refund fraud and identity theft.

Although these steps will delay everybody’s EITC/CTC refund a bit, the overall effect should be to avoid further problems down the road.

Let’s look at how this delay might affect VITA operations for the 2017 filing season.

Before February 15

It is important that the taxpayers know what to expect and that the delays are not caused by VITA preparers. The IRS and the Taxpayer Advocate Service are developing outreach campaigns. These are some of the important IRS messages we want to share:

  • The delay will apply to ALL EITC/ACTC refunds.
  • The IRS will delay the entire refund, not just the credits.
  • There are no exceptions. No paid preparer can get one of the affected refunds from IRS any faster.
  • The delay applies only to returns filed early — those refunds that in past years might have gone out before February 15.
  • Taxpayers should go ahead and file as soon as they have all of their tax information. There is no advantage to waiting until closer to February 15.
  • Taxpayers should NOT file without the EITC/CTC just to get withholding back and then later file an amended return to get the credits. This only means more tax preparation work — really doing two returns, 1040-Xs take forever (6, 8, 10 weeks?) to process and amended returns invite more IRS scrutiny. So this plan would just ask for trouble.

Your local Taxpayer Advocate may be able to help you spread the word by providing materials and messages. There’s at least one in every state and more offices are being added.

After February 15

The plan is that pretty much everybody who files early and is not flagged for any problems will get their refund on or shortly after February 15. The reality is that everyone who files early will not receive their refund by February 15. So what about February 16 and beyond?

  • All tax returns take a while to process. So someone who files February 12 won’t get a refund on February 15. The current message from IRS is that most refunds will take less than 21 days — probably much less in most cases.
  • Taxpayers who filed in January and have not received their money by February 15 will need to go through the normal routine: check Where’s my refund? and wait for correspondence.

Yes, all of this additional scrutiny is worrisome. That’s why the Taxpayer Opportunity Network is in ongoing communication with IRS SPEC and the Taxpayer Advocate Service regarding the timing and content of correspondence to taxpayers who are flagged and to determine how VITA sites can help taxpayers who may be affected by the new screening processes.

This article originally appeared on August 3, 2016 on cfed.org. To access the original article please click here.

New Census Data Shows Poverty Down and the Powerful Impact of Anti-Poverty Policies like EITC

We have some good news to report – poverty in the U.S. is declining. This morning, the Census Bureau released its latest income and poverty data, showing that the poverty rate declined from 14.8 percent in 2014 to 13.5 percent in 2015. That means that 3.5 million fewer Americans lived in poverty in 2015. The poverty rate for children also dropped from 21.1 percent to 19.7 percent. This is encouraging news indeed.

But, we cannot celebrate when 1 in 10 US households had incomes below $13,300 last year. When one in seven Americans still live below the federal poverty line (just over $24,000 for a family of four). When almost one in five American children are living in poverty. Instead, we must act!

Media outlets across the country will be covering the release of this data, giving us a chance to connect the dots between policy decisions and the struggles of people in our community. This is a chance to urge candidates for office and policymakers to support expanding the Earned Income Tax Credit for young workers and others not raising children in the home. The Census’s Supplemental Poverty Measure showed the pro-work EITC and Child Tax Credit lifted 9.2 million Americans above the poverty line in 2015. Congress and the new President have the opportunity to build on bipartisan proposals to expand the EITC.

This article originally appeared on August 3, 2016 on cfed.org. To access the original article please click here.

Where Credit is Due: How Building Credit Builds Financial Security

The first credit reporting agencies came into being in the 1950s and 1960s as a way of helping banks and retailers assess a consumer’s creditworthiness. Since that time, credit reports and credit scores have expanded in importance. A change in credit score can have significant impacts on the terms of a mortgage, and the details of a consumer’s credit history can serve as a gateway to everything from employment to health insurance.

Access to credit is an important asset-building tool. The ability to borrow money under reasonable terms allows households to weather instability and support long-term savings. Having access to credit also eases access to important pillars of wealth-building, like buying a home or starting a business. In this way, access to credit is, in itself, an asset. However, millions of Americans are either left out of the traditional credit reporting system or are blocked from financial and personal opportunity because of poor or erroneous credit.

We recently released a new fact file about credit reports and credit scores and their impact on wealth-building opportunities for low- and moderate-income consumers. Here are some highlights:

  • Nearly one in five consumers is “credit invisible” or has no credit score. Either because of a lack of credit history or a thin credit file, 45 million Americans have no credit score.
  • Most Americans have less-than-stellar credit. Over half of consumers that do have a credit score have “subprime” scores, which can result in higher costs for loans and more difficulty weathering income volatility.
  • The difference between having good and poor credit can be staggering. Compared to a typical subprime score, having a prime credit score can save you more than $32,000 over the course of a 30-year mortgage. Imagine having $1,000 more in your pocket every year after buying a home, and you can see how much of a difference good credit can make for the average low- or moderate-income family.
  • Poor or missing credit disproportionately harms households of color. Black and Hispanic individuals report higher rates of subprime credit and are significantly more likely to be credit invisible. Much of this is the result of discriminatory lending practices that pushed subprime loan products onto communities of color.
  • Credit reports are used for non-lending purposes like employment, health insurance and more. Despite the fact that credit reports were never designed to assess anything besides one’s ability to repay a loan, credit histories are regularly scrutinized by employers, despite the fact that in most cases, credit history has no bearing on job performance. So far, only eleven states have banned credit checks for employment.
  • Many low-income people who pay their obligations on time aren’t given the credit they deserve. For millions of Americans, the most consistent payments they make are monthly rent and utility bills. But for most of the history of credit reporting, this kind of recurring payment wasn’t captured by credit bureaus. Even responsible folks who have paid these obligations on time their whole lives can still have poor or missing credit. When negative events are reported (like collections and delinquencies) but positive and responsible behavior isn’t, a person’s credit history can unfairly paint them as financially irresponsible, despite steps they may have taken to prove otherwise.

The credit reporting industry is catching up to some of these trends. For example, many of the “big three” credit bureaus are developing alternative scoring mechanisms that will help bring previously unscored or low-credit people into the fold. However, more can be done to prevent credit reports from becoming barriers to non-lending opportunities like employment. To learn more about these opportunities, download our new fact file today.

This article originally appeared on cfed.org on July 16, 201. Click here to read the full story.

No One Should Have to Choose between Paying the Mortgage and Eating

Every day, Robert has to think about financial survival for himself and his mother, whom he lives with and supports financially. He works part-time as a griller at a breakfast fast food restaurant, but he doesn’t always have enough for food on his own kitchen table.

Even when Robert is able to stretch his income across all of his bills, he and his mother have to cut back on some things. “Usually it’s food,” he says. “Eating less—it’s kind of good for you, kind of bad.”

Robert’s precarious financial position means that food isn’t the only necessity that he can’t always take for granted. He relies on a water pump outside of his house, but he can’t always keep the lights on inside. “One time during the summer, they cut off our lights because we just couldn’t pay it,” Robert says. “It was one of the worst times in my life.” He says that he didn’t realize how much he needed lights in the house until they went out. Spending money on entertainment is out of the question. “You really don’t need it,” he says.

Robert describes being able to scrape by with occasional cuts in food and utilities, but says that, despite his constant uncertainty about how much money he’ll have left over, he absolutely cannot skip the mortgage payment for the small house that he and his mother occupy. He knows that missing payments could lead to eviction, and he’s willing to go hungry to avoid that, if he has to. “It would just suck getting kicked out after so long...paying,” he says.

In terms of improving his financial situation, Robert says that his main focus is earning more income. He views his expenses as having a clear hierarchy of priorities, with the mortgage at the top. He always pays it first, and then other bills, such as the electricity, if he can. “It was pretty simple,” he explains. “You just say, ‘Hey, not going to pay for the phone bill [and] cut this on food, and we’ll have enough for next month.’ It’s pretty simple. It wasn’t like, ‘Dang, got to bust out the calculator.’”

To make purchases, Robert and his mom share a prepaid card. He noted that one problem with such a system, however, is that his pay varies week to week, so that the amount he would have to spend would be inconsistent. He also says that it can be hard to plan out his expenses exactly. “I can actually have my money set out for what I should spend my money on […] but sometimes […] I want a snack or something, and you end up [with] not enough.”

With regards to benefits at work, Robert doesn’t get much from his employer by way of help with his finances. He knows that direct deposit is available, because a little TV in the restaurant’s back room plays an advertisement for the service over and over again. Robert says that he trusts direct deposit, simply because the service (and the advertisement for it) comes from the company’s corporate office. Nevertheless, he doesn’t use direct deposit, because he wants to have cash in his hands at the end of the week. “Something about cash feels really good,” he says. “I know I have it.” And, for Robert, having physical cash is central to managing his finances. “When I have the cash, I can see how much money I have left,” Robert says. “In the bank account, not really.”

This article was originally published by Samuel Weinstock on July 18, 2016 on cfed.org. Click here to read the full story.

Photo: SelectStock | Getty Images

 

Stand Up for 13 Million Working Americans

Ask Congress to Expand the EITC for 13 Million Young Workers and Workers Who Cannot Claim Children on Their Taxes

On Thursday, July 14, 2016, over 60 United Way leaders from 29 states, including representatives from Marylad, went to Capitol Hill to advocate for common sense policies for young workers and workers who cannot claim children on their taxes. Specifically, they advocated for the expansion of Earned Income Tax Credit (EITC).

The Earned Income Tax Credit is a refundable tax credit for low- and modest income working people that encourages and rewards work, offsetting federal payroll and income taxes. Here in Maryland, volunteer tax prepares returned $13,692,928 to 9,587 Marylanders. That is money that went straight into the pockets of hard working moms and dads, military services members, custodians, administrative assistants, and many others. Money that was spent on things like more reliable transportation, childcare, or groceries.

The EITC works for people like our very own James Baker, who used it to become financially stable when he was working, going to school, and starting life as a new father. After his experience, James became a volunteer tax preparer so that he could help others just like him. Click here to watch James’ story.

The EITC is broadly considered our nation's most effective pro-work, anti-poverty tool. However, lower-income working Americans who cannot claim children on their taxes access little to no EITC. Also, young people age 21-24 are ineligible. So while the EITC is one of the most effective tools we have to help working families, like the Bakers, keep their heads above water, it excludes millions of people.

Congress can expand the EITC for workers who cannot claim children on their taxes and lower the age of eligibility to 21. Please help us connect over 13 million people to #EITC so that they can get a chance at getting ahead and creating a better future for themselves. Ask your Representative to expand the EITC today

Prosperity Savings Account Success

We have succesfully put our first person through our Prosperity Savings Account program - and she bought a home! Head over to the Frederick News Post to read about Mandie's story and how The Prosperity Center helped her realize her goal.

Ribbon Cutting

The Frederick News-Post stopped by for the opening of our new building. Read what they've got to say!

Prosperity Center Helps Families Save More of their Hard-Earned Money

 

FREDERICK, MARYLAND – Free tax preparation is a key component of the Prosperity Center's community goal to cut the number of lower-income families who are financially unstable, currently estimated at 16,000. This year alone, IRS-certified volunteers at the Prosperity Center have prepared and filed 516 returns helping bring back $872,351 in refunds to our community.

“Even though our service is free, we are making sure that it is high quality. Families not only save two or three hundred dollars they would have paid elsewhere, but they also get their maximum refund,” said Rebecca Full, VITA Site Coordinator.

Each year, 3,100 Frederick families fail to claim as much as $6.2 million in tax credits — about $2,000 per household. At the Prosperity Center, volunteers help families making less than $54,000 annually get their taxes prepared for free and ensure they are claiming important tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Families making less than $62,000 can also file for free online using United Way’s MyFreeTaxes.com.

Angie Liddiard, previously the Prosperity Center manager, said, “We are not here to put a band aid on a problem but to help people achieve long-term financial stability. A lot of our clients choose to invest their refunds into our matched savings program and sign up for financial literacy classes. These programs really help them transform their lives.”

The Prosperity Center is always looking for volunteers, especially tax preparers and Budget Coaches. To learn more about volunteer opportunities and about the matched savings program and financial literacy classes, visit unitedwayfrederick.org/volunteer.

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