Despite the existence of tax credits, such as the Earned Income Tax Credit, and the potentially significant benefit for low-income people in filing taxes, year after year many who would benefit don’t file their taxes. You can leverage your position as a trusted employer to encourage your employees to file their taxes. In order to do so, you should:
- Outreach to your employees throughout the year
- Help address misconceptions and barriers they may face
- Share resources to assist them in filing taxes
This learning guide, the final in our series on taxes, will help show how your social enterprise can achieve all of these.
1. Outreach to your employees throughout the year
Outreach efforts are critical to help eligible enterprise employees learn about and claim tax credits. Since workers move into and out of eligibility based on changes in their marital, parental and financial status, it is important they are made aware of this and other credits available if they qualify. Outreach efforts are especially important for enterprise employees who enter the labor force for the first time, earn too little to be required to file a tax return, earn less than expected during the year, mistakenly think they do not qualify for the credits, or do not know that they can file their taxes for free and claim the EITC for up to three previous years.
Social enterprises can promote the filing of taxes directly to employees by including tax credit information with paychecks, hanging posters in the workplace, and making information available through employee resource lines. Managers can incorporate information into employee manuals and training for new hires.
Many social enterprises operate in a transitional model, meaning that many employees will have moved on by the time tax season begins. This means that doing outreach only during tax season will exclude many of your employees from throughout the year. If your social enterprise operates in a transitional model, be sure to conduct education and outreach throughout the year. This can be done at the time of hire, as well as throughout the year by using opportunities to talk to your employees about taxes and address any misconceptions they may have.
We have developed a template that you can use to create an information flyer to display at your social enterprise and/or give to your employees at the time of hire. You can access the tool here.
2. Help address misconceptions and barriers they may face
Perhaps the biggest barrier to filing taxes are the number of misconceptions that exist about filing taxes. The most common myth is that low-income populations do not have to file their taxes. Many believe that they do not need to file their taxes because they do not earn enough and therefore won’t owe any. Similarly, people may believe that there’s no point in filing their taxes if they don’t owe any. But, in reality, neither may be true.
If someone earns enough to owe taxes, then they need to file and pay accordingly in order to avoid penalties for not doing so. However, the converse is also true: if someone doesn’t earn enough to owe any taxes, they should still file them in order to take advantage of available tax credits. So while it may be true that low-income earners aren’t required to file taxes, that doesn’t mean there’s no reason for them to do so.
There are also common misconceptions about the cost of filing taxes. Unfortunately, there are unscrupulous actors out there that aim to take advantage of people by charging up-front and unnecessary fees. However, there are a number of resources available to help low-income earners file their taxes at no cost, which we share below. Additionally, these resources will be more familiar with taking advantage of various tax credits for which low-income earners might qualify.
Finally, people may struggle to find the time in order to file their taxes. It is worth emphasizing that a tax refund can be worth hundreds, if not thousands, of dollars, so the time invested in filing taxes is time well spent.
3. Share resources to assist them in filing taxes
In addition to encouraging your employees to file their taxes and addressing any misconceptions they have, your social enterprise should share resources on ways to help them file their taxes.
Volunteer Income Tax Assistance (VITA)
If you make $54,000 a year or less, you can access free tax return preparation services available at more than 13,000 community volunteer tax assistance sites. The Volunteer Income Tax Assistance (VITA) program offers free tax help, and each state has a VITA lead and many local VITA sites. You can use this tool to locate VITA sites that are close to your social enterprise and where your social enterprise employees live.
IRS Free File
For those earning less than $66,000, the IRS’ Free File allows you to use brand name software products and electronically file your return to claim your tax credits. Visit the IRS’ website to access the software.
Another resource is MyFreeTaxes.com, which is a partnership between United Way Worldwide and H&R Block and is also available for anyone who makes less than $66,000. This resource is appropriate for taxpayers who feel comfortable completing their own return and feel comfortable online.
It is very important to share free tax return preparation services with enterprise employees. Although other tax preparers might be better known than the VITA program, such tax preparers not only may charge for the tax filing, but can also charge a fee to just find out if an individual or family qualifies for the EITC. With the goal of putting more money into enterprise employees’ pockets, it is best to encourage employees to file at VITA sites for free or one of the other online resources listed above.
As we have hopefully demonstrated throughout our series on taxes and social enterprise employees, there are many benefits that may come to low-income tax filers in the form of tax credits on both the federal and state level. As a trusted employer and resource for your employees, you are able to play an important role in encouraging your employees to file their taxes and directing them to the resources that can help them do so. This is something that you should build into your employee support offerings throughout the year, with a special emphasis during tax season in the beginning of 2019. It can be an important way to put more money into the pockets of your employees, both present and past. This is money that is shown to be used to pay for necessities, repair homes, maintain vehicles that are needed to commute to work, and in some cases, obtain additional education or training to boost their employability and earning power. And, ultimately, isn’t that aligned with the mission of your social enterprise to begin with?