Tri-CAP provides free tax preparation program for many people experiencing low to moderate-income levels in central Minnesota. The $2.8 million in refunds clients received last year (on average, $1826 per household) represents approximately 11% of their yearly adjusted gross income. Clients report that they generally use their refunds to pay rent, repair vehicles, pay past due bills, and address other basic needs.
Tri-CAP’s tax preparation program encourages economic self-sufficiency for clients by allowing them to retain their entire refund. The website www.taxes.about.com indicates the average return filing costs a consumer $200 for a paid preparer. In addition many predatory tax preparation businesses sell consumers a “refund anticipation loan” charging a fee of 10% of the loan, potentially costing a low-income person $500 on a $5,000 refund. By providing free tax return preparation services and e-filing the return (which discourages predatory loans by making returns available to clients in about 5-15 days), Tri-CAP estimates having helped the 1,533 households we served in 2018 save more than $300,000 in tax preparation fees.
While using rebates for necessities is beneficial for families, it does not address clients’ longer-term financial stability. In response to data collected during previous filing seasons, we know that approximately 23% of Tri-CAP clients are unbanked and 40% are underbanked. In response, Tri-CAP has incorporated financial literacy tools and encourages tax clients to utilize their refund to work toward ongoing financial goals. Some examples are requesting a credit or ChexSystem report, buying a savings bond, depositing all or part of their refund in a savings account, or attending a free Financial Fitness class through Tri-CAP.
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