The EITC as an economic empowerment

tool Kentucky Domestic Violence

Association Economic Justice Project

PresentersMary O’Doherty, economic empowerment project director, Kentucky Domestic Violence Association

Christy Bailey Wooldridge, survivor, IDA participant and homeowner in Owensboro, Kentucky

KDVA’s Economic Justice Project

Individual Development Accounts (IDAs), financial education, micro loans and credit-building

Kentucky Asset Success Initiative (KASI)

-- Free tax-preparation services offered at more than 70 sites across the state

-- Served 11,256 families in 2011, saved each an average of $209 in filing fees.

-- Funded with a grant from the IRS

-- Sites at DV programs typically serve clients & their families only as well as staff members

Kentucky Asset Success Initiative: 6 regional

coalitions

11,256 Returns • 77 Counties • $17.3 million in Refunds

More KASI infoTaxes are filed electronically by volunteers who are trained by the IRS.

Refunds can land in bank accounts can as early as 7 days later

Filers’ median Adjusted Gross Income (AGI): $14,571

One third of Kentucky filers claiming the EITC in 2008 obtained a Refund-Anticipation Loan*

Average RAL in Kentucky is $3,300 and the average APR is 72 percent*

*according to an analysis of tax filings by the National Consumer Law Center

Why did KDVA get into the free tax-preparation business?Answer: EITC EITC responsible for the largest infusion of cash into low-income households each year

Opportunity for economic empowerment advocacy

Too many clients use paid preparers and are tempted by Refund Anticipation Loans (RALS).

Importance of opening sites as early as possible: most begin serving families in mid-January.

Economic Abuse and EITC

Abuser is the non-custodial parent but he files taxes first, claiming the children.

Survivors find out when they file taxes and their returns are rejected. Too often they feel pressure to let him have the money.

Advocacy opportunity: Inform clients of their right to file a paper return and claim EITC. If they do, the IRS will investigate and go after the person who made the improper claim.

Prior year returns: IRS will allow you to file an amended return up to 3 years.

Tax season = good time for economic empowerment

advocacy

• Low-income families typically do their most intense financial planning at tax time: Encourage clients to make the most of the opportunity

• Don’t wait until tax time to begin planning

• Encourage “Unbanked” clients to open accounts: they will get their refunds faster

• Advocate for a household emergency fund

• Budget some money for fun!

Economic Empowerment advocacy at tax time,

continuedEITC can help survivors achieve self-sufficiency but it takes time…

1st Year – Client in crisis; money needed for bills, deposits, emergency expenses.

2nd Year – Client able to do more financial planning. IDA deposits more likely to happen.

3rd Year – Time for meaningful financial planning. Client makes substantial deposits into IDA, establishes a solid emergency savings account.

A survivor’s perspective

Meet Christy Wooldridge: EITC played an important part in her journey to self-sufficiency. Several years before she bought this home with an IDA, Christy received services through OASIS, a domestic violence and drug and alcohol treatment program in Owensboro, Ky.

Today, Christy is the director of operations at the Boulware Mission, a homeless shelter in Owensboro, Ky. She just finished a degree in social work at Owensboro Community and Technical College.

In 2004, the EITC helped Christy become

self-sufficientLearned about the EITC from OASIS where she was enrolled in the IDA program.

She moved to the Boulware Mission, another homeless shelter, where she worked as the weekend manager.

She claimed the EITC that year, the first time she had enough earnings to file taxes.

She used her $3,100 tax refund to buy a car. That meant she could get a second job as a manager at a Burger King.

• Complete an IDA program: Christy was saving for a home. Her $1,000 deposit was matched 2:1, giving her enough for a down payment.

• Buy a house (in Jan. 2007)

• Buy new furniture and a washing machine

• Open a 2nd IDA, for education

• Establish an emergency fund that kept her going when illness caused her to miss 6 weeks of work

Since then, the EITC has made it possible for Christy

to…

Since 2004 the EITC injected from $3,100 to $3,600 a year into Christy’s household budget. The credit helped her create a stable home for her daughter and gave her the financial security to plan for their future.

Thank you for your attention

For more information about KDVA’s Economic Empowerment Project….

Mary O’Doherty

modoherty@kdva.org

502 209-5382