The free services provided by KASI volunteer tax preparers saved families $1.4 million in tax preparation fees and predatory refund-anticipation loans -- an average of $205 per taxpayer. IRS data shows a third of tax filers who claim the federal Earned Income Tax Credit (EITC) typically obtain such loans, which have annualized interest rates that generally exceed 200 percent.
The primary goal of the KASI free tax-preparation sites is to ensure working families who are eligible claim the EITC. The IRS estimates that as many as 20 percent of Kentucky families who qualify for the EITC do not claim it.
In 2008 the initiative sponsored 58 free tax sites in eastern, central and western Kentucky.
In 2008 families who claimed the EITC received a maximum credit of $4,716 for a family with two or more children.
“The EITC is one of our best anti-poverty tools, and I want to make sure every eligible Kentuckian takes advantage of it and gets the money they deserve,” Kentucky Governor Steve Beshear said.
Specifically, Gov. Beshear announced a list of nearly 200 free tax preparation sites serving 90 counties across the state where volunteer tax preparers who have been trained and are IRS-certified will assist Kentuckians with their taxes and help them apply for the EITC.
KASI free tax preparation sites also helped steer families away from refund anticipation loans (RALs). Many tax filers get RALs in or order to receive their refunds on the same day they file for them. The average RAL has an interest rate of 20 percent. However, the annualized interest rate of these loans generally exceeds 200 percent, providing a very poor value for taxpayers.
Families often choose RALs because the payment is deducted from the amount of their refund and may seem reasonable to those who need their tax refunds quickly.
However, these fees are the equivalent of high interest loans to tax filers in advance of their tax refunds. IRS data tell us that two of every five taxpayers in the KASI counties, which includes Pike county, used a RAL. It is estimated that families using the KASI sites in 2008 saved $1,067,000 in preparation fees and an estimated $341,458 that would have gone for refund anticipation loan fees.
It is reccommended tax payers call before going to the free tax preparation sites.
Kentuckians who wish to file their own taxes online may still be eligible to file for free, thanks to the “Free File Alliance” sponsored by the IRS, Kentucky Department of Revenue and the tax software industry. To see if you qualify to file online for free, visit www.revenue.ky.gov/freefile.htm.
Information about these sites, including addresses and phone numbers, is available on the Web site Gov. Beshear unveiled in October, www.assistance.ky.gov.
These sites will begin offering their services on various dates between mid-January and February 1
More than 6,800 families took advantage of the free tax-preparation services in 2008 and more than 2,203 of those participating families claimed the EITC
“As tax season 2009 approaches we want to build on our success and reach even more families,” says O’Doherty. “With the current economic downturn, this initiative is more important than ever.”