Offer free tax prep to low income church members?

[AZ-Tax]

To financially help the low income parishioners of my church, I was considering offering free tax preparation but obviously I don’t want the wealthy to take advantage of this so I could use some ideas on how to write it up.

Free tax preparation does not apply to:
Business, Partnership, Estate, Rental (probably more to add to this) tax returns.
Taxpayers with gross W-2 household income above $50,000.

Taxpayer must have all tax related documents at tax preparer before March 1st, 2010.

Any input from board members would be appreciated.

[Lion]

Nice

You may not want Schedule C revenues above some set amount.

You could see what the requirements are to have free tax prep at the IRS and then do the same. Or the local Vista or AARP or other volunteer tax prep groups that prepare taxes at senior centers and libraries and such.

You could let your clergyperson screen them and recommend them to you.

Up to XX returns or, as you said, up to 1 March or earlier.

[solomon]

Your exposure will decrease dramatically as you will not be considered a preparer for the freebies so your name should not appear on the 1040 as a paid preparer. §301.7701-15(f)(B)(xii):

A person who prepares a return or claim for refund for a taxpayer with no explicit or implicit agreement for compensation, even if the person receives an insubstantial gift, return service, or favor.

This is one of several that is not considered as a preparer.

Last year the income limit for VITA was 50K in central Texas.

[taxmandan]

Tried that once, never again

You're setting yourself up for a negative experience. You want to cherry pick the low income people in a way that will offend many of the church members who think they should get free service too.

Several years ago while I was affiliated with a nat'l franchise office, they thought it would be a good idea to offer free prep to low income at the food bank. One weekend in March. On Saturday we had people show up needing Sch, A, D, C, E and F. One lady had her grandson's stuff because they had investment income that required filing. When we refused to accomodate those people we were called numerous foul names and had to retreat from the church. We cancelled the Sunday plans too.

Moral: what you think is low income and what they think is low income are different. If this is the church you attend, you may need to change because of the bad feelings it will create. IMHO

[JohnH]

I agree with all the above - each post contains valuable insights. It can turn out to be a sticky problem due to the perceptions of others concerning how much they qualify for help. How many times have you had paying clients tell you "Mine's just a simple return" and then you find they sold a mutual fund they'd held for 10 years with reinvested dividends and don't have any statements or supporting info other than their 1099-B? How would your $50K policy apply to a healthy person who retired early, voluntarily cuts off their part-time work at $13K each year in order to avoid repaying SocSec benefits, but also has $30k in interest, dividends, and CGD's? Are they in need of assistance, or just taking advantage of your policy? One thing to keep in mind is that you only have so much time you can devote to helping others - it should go to those truly in need.

You may want to let your pastor and benevolence committee know of your interest in helping those in need and then let them do some screening for you. Those whom you help will likely tell others and slowly you'll begin to get a feel for where you want to set the cutoff points, which you can tweak or change at will depending upon the individual circumstances. Setting & announcing some sort of policy on something this sensitive will very likely get you into situations you'd rather not be in.

I don't seek business in my church, but over the years it has come to me thorugh word of mouth. I have several clients from church whom I charge the full rate and a few whom I assess the PITA rate without a second thought. However, there are also some whom I charge no fee or a drastically reduced fee (some don't seek outright charity or are too proud to ask - they just need a break on the fee). There have been a few cases of temporary financial hardship in which I'd give them an invoice and hand-write on it that I don't want them to pay me due to their current financial circumstances, but when they get back on their feet I'd like to suggest that they donate that amount to a special church fund. (I've learned though a couple of slightly embarrassing situations to add that I DON'T want the donation to be made in my honor.)

Some of the free & reduced fee people came to me through the church staff or benevolence committee members, while others came through a friend or family members encouraging them to talk to me. Your desire to serve is commendable - let it be known to the right people and those who truly need help will find out over time. By letting the program develop slowly, with input from those charged with evaluating the matter of need on an individual basis, you'll probably find that you're more comfortable with the result.

[Jiggers]

I wouldn't do!

Too many complications. Clients come to me now with their "simple" return. These turn into major projects because what they consider simple isn't!

I also quit doing "reduced fees" for churches and other non-profits thinking that by doing so that I would pick up some of their members.

I didn't. I also ended up spending more time because of their lack of tax knowledge and bookkeeping skills. Then I saw what they were paying their administrators and what they were paying me. They had the nerve of saying that they could do their stuff in-house, by one of their "free" directors and withdrew their services. They came back to me a year later, with their records all messed up. I re-quoted them a considerably higher fee and they "felt insulted". I responded appropriately.

The same applies to relatives. They think they should get their work free. Yet when I visit their place of business, I don't get reduced fees for haircut, fuel at their convenience store, items I buy at their department store, meals at their restaurants, prescriptions at their pharmacy, etc. So I don't discount them either.

[JohnH]

Maybe I misunderstood, but I didn't take the original post to mean that that AZ-Tax was proposing using this to gain more business. I understood this to be a service intended to be provided to truly needy people - there is definitely a place for that type of discounting or free services IMO. But I also agree completely that any expectation of any sort of quid pro quo willl almost always be disappointing.

[PIGLEE]

Our pastors and deacons know I will help people for free, if they need it. Mostly it is new Christians that are trying to get their lives straight. I really enjoy doing this, it is really nice, to see the pressure gone from their faces. I also would not promote it, but let the pastor, or deacons, know of your willingness to help. The last one I did, was referred by a deacon, and later I received a card that he had donated money to the Gideons, in my honor. That really thrilled me, and what a nice way to say thank you to someone.

[PIGLEE]

This subject reminded me of something that happened years ago. A young man that was a custodian at our church (I did his tax return for almost nothing) and was getting married to a woman that had three children. Her only income was from welfare and did not even file. They announced that their wedding was going to be January 1st, at the church. The ladies were working up a simple but special wedding for them. When I heard January 1st, I thought OH NO, why not December 31st. I called them in and talked to them, and showed them about the Earned Income Credit. I explained that the pastor could do a private ceremony in December, and they could celebrate the wedding on the 1st. She was in shock, not fully understanding it. He was in tears, and his comment was, that means I will be able to buy her a wedding ring. I was also in tears. She got her ring!

[luke]

Legal Advice

I got the following "legal Advice" from one of my attorney clients (and have applied it MANY times over) - "No good deed goes unpunished!"

[Burke]

I have several clients whom I charge the full rate and a few whom I assess the PITA rate without a second thought.

I am fascinated by this and would like to implement it. How do you you determine the PITA rate? Just case by case or do you have a specific formula or basis?

[JohnH]

PITA's seem to defy any rational method of setting a formula or rate. They are just too creative in the numerous ways they can create disruptions. Some situations just don't lend themselves to standardization. I can't provide any guidance, other than to say I use my judgement in charging them more than I would charge normally - I'd say the premium would probably fall into the 20-30% range, but that's just a guess. To me, a PITA is someone who is extra trouble on a fairly regular basis, but not someone I don't want to do business with - if that makes sense.

[ChEAr$]

pro bono work

I've waited a bit to see what others would say and for the most part we agree.

Recently I had occasion to talk with the local State of Alabama veteran's service office manager. After I left, the thought occurred to me (and this was about three weeks ago) that there may be some homeless veterans who are hopelessly being hounded by IRS and of
course can't afford one of those television advertised $5,000 fee firms. I won't call any names of course. (grin)

The manager could screen them for me, referring only the most hopeless cases to me.
But, I thought, what if here's a homeless veteran being hounded for previously unpaid
941 taxes? previous schedule c complications? AND where should the referrer draw the line and how?

So that's about as far as my idea got.

As to AZ's proposed pro bono work for church members, you can bet your bottom dollar that the minister himself will be wanting free service.

I probably should mention here in fairness that I will not do ministers' returns. Many of y'all can relate to that I'm sure.

[JohnH]

Harlan:
Agreed that everybody's experience is different - I'll have to relate a totally different experience with ministers.

I prepare several minister's returns and not one of them has ever asked for a freebie - most of them are adamant about paying and one always pays more than I charge him. (I, in turn, always find a special reason to give it back to the church). There are two ministers that I currently insist on not charging for very good reasons, but again they didn't ask - it was strictly my decision.

So while I'm not saying you're wrong that some ministers would put themselves at the front of the line if this is presented as a benevolence issue, I submit that they would be the exception rather than the rule.

[MAMalody]

I would also take exception to the comments on clergy being at the head of the line for a "freebe." I only do clergy and religious workers and have never had any one try to beat me out of a fee. If anything they wonder if I am charging enough. I have had them refer a few "needy" people to me that I have been willing to do for free, but, even those wanted to pay something and a week or so later, usually after their refund, a "gift" would show up in the mail.

I would say that AX-Tax has his heart in the right place, but the implementation can be sticky. I would just say, do what you think will work best, maybe through church leadership and see what happens. You may get burned, but the satisfaction of helping others that need your expertise and are unable to afford it will more than make up the difference.