by Daniel Cox


Hi-Tech Tax Help
New web site allows clients to file for EITC refund online

When Julia Denetsosie applied for her Earned Income Tax Credit (EITC) in the spring of 2000, she never imagined the tribulations that would ensue. 

Like many low-income Americans, Denetsosie, a Native American of Navajo descent from Kayenta, Ariz., filed her return with a commercial tax preparer, who advanced her $5,000 in anticipation of the government refund. However, her return was improperly filed and ultimately rejected by the IRS. By the time she learned her return had been denied, Denetsosie had already spent most of the $5,000 and had no way of paying off a loan that was now spiraling out of control.

Many EITC recipients sign up for such “refund anticipation loans” without even realizing it, says Chi Chi Wu, staff attorney for the National Consumer Law Center. She says it’s “the largest sum of money that low-income families see all year”—$1,600 on average but sometimes as much as $4,000. 

According to Wu, commercial tax-preparers like H & R Block siphoned off $1.2 billion from the EITC program in 2002 by allowing low-income earners to borrow against their refunds with sky-high interest rates of up to 700 percent—in order to get their cash back now, instead of waiting a few weeks for Uncle Sam to deliver their refund.

Wu believes that low-income families are specifically targeted because they are not always well-educated and may face language barriers when navigating the labyrinthine U.S. tax system. “In 1993, EITC returns became substantial,” Wu says. “It didn’t take long for the sharks to start swimming in.”

On Feb. 3, the Legal Aid Society of Orange County (LASOC) came to the rescue, cyber-style. LASOC has launched a new web site (www.icanefile.org) that allows taxpayers to file for their EITC return online and get a speedy response without being gouged by a tax preparer. By all accounts, the online system is highly preferable to the dubious refund anticipation loans. 

The EITC web site allows users at a fifth-grade literacy level to log on, answer basic questions about their financial circumstances, and then file their return online or print out the forms and mail them to the IRS. Since its debut this winter, 149 users have received $355,340 back in federal refunds, and CBS plans to air a public-service announcement telling more Americans about the site. 

“The I-CAN! Earned Income Tax Assistance Project is a terrific illustration of how the IRS can work with grassroots community organizations that provide free, visionary services that help low-income earners get a full, speedy, and often critical EITC refund,” states IRS Commissioner John Dalrymple, who oversees the IRS Wage & Investment Division.

Those responsible for the new EITC filing system are the high-tech wizards at LASOC who pioneered the Interactive Community Assistance Network (I-CAN!), which allows low-income residents to address a host of legal problems using touch-screen kiosks.