MEMBER PROFILE

Ted Bronsnick

Ted Bronsnick, who takes pride in being one of Alternatives first members, came in for an auto loan. “I did check with other lenders,” he told Consumer Loan officer Amy Smith, “but I decided to get my loan at Alternatives. A few other places had rates that were a bit lower, but Alternatives, in an effort to be competitive, was willing to lowers their rate by .75%. I felt my relationship with the Credit Union was reason enough to support what they do by getting my loan with them.”

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Why is a community development Credit Union 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 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 are nothing short of 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).

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.

Related Links
http://www.brook.edu/dybdocroot/es/urban/publications/berubekimeitcexsum.htm
http://eatthestate.org/06-14/RapidRefundScam.htm
http://www.uwm.edu/Dept/ETI/2001/raleitc.htm