IRS RESPONSE TO RECOMMENDATION: The IRS VITA/TCE program guidelines are determined by tax law complexity. Implementing financial guidelines would result in fewer taxpayers served overall due to additional screening time, and may also exclude some taxpayers who are eligible for service under the current guidelines.
CORRECTIVE ACTION: N/A
TAS RESPONSE: The National Taxpayer Advocate fully acknowledges that the definition of in-scope refers to permissible tax law topics in a tax return and does not refer to income levels. However, these programs are based on the Earned Income Tax eligibility level. The EITC is one of the most complex provisions in the Internal Revenue Code, and VITA programs prepare many returns including the EITC. Therefore, complexity is not the overriding factor in setting income levels.
Moreover, current income limitations exclude many taxpayers who are low income under Low Income Taxpayer Clinic (LITC) guidelines, yet are excluded from VITA income guidelines. To qualify for assistance from an LITC, generally a taxpayer’s income must be below 250 percent of the current year’s federal poverty guidelines, based on family size and with income adjustments for Hawaii and Alaska. VITA income guidelines, using the EITC threshold as the income floor, could include some flexibility for extenuating circumstances. As the chart below shows, an expansion of income guidelines would not exclude taxpayers who are eligible for service under the current guidelines, but to the contrary.
For example, under a 250 percent standard, a family of five would be eligible for VITA services up to an annual income of nearly $72,000. Under the current standard, a family of five would be eligible for VITA services up to an annual income of $54,000. For one person with no children, the income under the 250 percent of the federal poverty guidelines is twice the amount of income under EITC guidelines. For two persons filing married filing jointly, the income is greater than the EITC level by $20,171.
We disagree with the IRS’s speculation that the additional screening time would result in fewer taxpayers served. The VITA Program already requires volunteers to screen taxpayers. Volunteers who screen taxpayers could easily refer to a figure that is prominently posted of the incomes meeting the 250 percent of Federal Poverty Guidelines. LITCs do this all the time.
ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted
OPEN or CLOSED: Closed
DUE DATE FOR ACTION (if left open): N/A