The EITC as an economic empowerment tool Kentucky Domestic Violence Association Economic Justice Project

Presenters Mary 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 info Taxes 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, continued EITC can help survivors achieve self-sufficiency but it takes time… 1 st Year – Client in crisis; money needed for bills, deposits, emergency expenses. 2 nd Year – Client able to do more financial planning. IDA deposits more likely to happen. 3 rd 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-sufficient Learned 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 2 nd 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