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How Free Tax Preparation Program Concerns Community Development

Why is a Community Development Credit Union (CDCU) like Alternatives sponsoring a free tax preparation program? We want to get the word out to members as well as other low and moderate income workers that they may be eligible for the Earned Income Tax Credit (EITC). CDCUs and EITC share a mission: to help build assets for individuals as well as communities. A further goal is to protect EITC dollars and other tax refunds from being lost to commercial tax preparation services that charge huge fees for preparation and so called “rapid” refunds.

Earned income tax credits reduce poverty by encouraging and rewarding employment. The federal Earned Income Tax Credit, the nation's largest cash or near-cash program directed at low-income families, is also the nation's most effective government program for lifting children out of poverty, according to research from the National Center for Children in Poverty.  

Many more people are eligible for EITC than claim it, probably because of the erroneous beliefs that only people with children are eligible and that only people who owe income tax can claim EITC. In addition, many taxpayers who do file a return wind up handing over a big chunk of the EITC to their tax preparers for preparation and “rapid refund” loans. These refund loans qualify as predatory lending. Companies advance money based on the worker's anticipated income tax refund, and the loan is repaid once the Internal Revenue Service issues the refund payment. Fees are steep for tax refunds that arrive a few days or weeks early. Annualized, interest rates are often as high as 250%!  

By contrast, the Alternatives Credit Union Free Tax Preparation Program provides free tax preparation assistance by trained volunteers for basic IRS returns.  

It’s simple to see how EITC and free tax preparation can benefit the individual. To expand on these benefits, if people have or open savings or free checking accounts, the refund can be electronically deposited for more immediate access to the money, and there won’t be a check-cashing fee. Some may be eligible for matched savings in an Alternatives IDA (Individual Development Accounts).  

Earn 10% APY* with Alternatives’ Free Tax Preparation Program Savings Certificate.
The Free Tax Preparation Program Matched Savings Certificate is open to anyone whose tax return is processed by Alternatives’ Free Tax Preparation program.

  • A minimum deposit of $200 is required to start the Certificate - via your tax refund or own personal funds.
  • The maximum deposit is $500.
  • Certificate must be open for one full year to earn 10% match.
  • Maximum dividend: $50

Talk to your Free Tax Preparation Program volunteer for more details.

The following terms apply to the Free Tax Preparation Savers Certificate:

Setting a dividend rate
The annual percentage yield is fixed at the time of opening. Your account will mature on the date disclosed when you open it. Rates are in effect from the date of opening until maturity.

Minimum opening deposit and balance
You must open this account with a minimum savings of $200.

Method of calculation of dividends
We use the daily balance method to calculate the dividends in your account. This method applies a periodic rate to the principal in the account each day of the dividend period.

Dividend crediting and compounding
Dividends will be paid to this account at maturity. Dividends do not compound.

Withdrawals from account, penalties
There are no partial withdrawals permitted. If you close your account before dividends are credited, your de posits will be paid, but you will not receive the accrued dividends. Withdrawals for the purpose of closing on a home purchase are permitted without penalty.

Deposits to accounts
The maximum deposit to this account is $500.

Renewal at maturity
Prior to maturity, the member will receive a notice from Alternatives asking how the funds should be handled. Funds may be transferred to either an Alternatives savings or checking account, or the member may have the funds mailed to them by check, or the funds may be used to open a standard certificate at the current, regular rate. If instructions are not received from the member at maturity the certificate will roll over into a standard 12 month CD at the current, regular rate.

Community benefits
Taking it further, the community benefits because chances are good that a significant portion of these funds — the IRS estimates that each year in Tompkins County $1.4 million goes unclaimed by eligible low income households which badly need the money — will be spent in the local community.

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In accordance with federal law and Internal Revenue Service policy, this institution is prohibited from discriminating on the basis of race, color, national origin, sex, age, or disability. To file a complaint of discrimination, write to Operations Director-Civil Rights Division, Internal Revenue Service-Room 2413, 1111 Constitution Avenue-NW, Washington DC 20224 or email them at edi.civil.rights.division@irs.gov.  

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Joe Nolan, Home Green Home

My family's credit union has been Alternatives since '96; We liked the mission, and who could resist banking in a converted house? In 2005 I started thinking about a retail start-up called "Home Green Home" that would sell healthy and eco-conscious home furnishings and renovation supplies. The Business CENTS class helped me to understand and develop the elements of a business plan, and set me on the path to taking the big leap.

At every stage, I've felt well supported by Alternatives' friendly staff. From one-on-one consultation to business banking and credit needs, I've received quick, helpful service at Alternatives. We always look to partner with organizations that share our values, and Alternatives fits the bill.

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