People with low incomes are often entitled to special tax treatment that could lower their bills from the Internal Revenue Service. But some of these breaks, such as the earned income tax credit or child dependency rules when family members are helping out financially, are complex and create additional problems for eligible individuals.

In many cases, lower-income taxpayers who could benefit from the tax laws can’t afford to hire a tax specialist for help in deciphering them. Their tax troubles are compounded if they must battle the IRS alone in resolving post-filing tax disputes.

The IRS supports several programs to help eligible lower-income taxpayers not only get their returns properly filed, but then to help individuals if they encounter any subsequent tax problems in connection with their filings. The filing assistance is free. Follow-up help is free or the providers charge only a small fee.

VITA program

The Volunteer Income Tax Assistance program, or VITA, uses community volunteers who are trained to help filers deal with the often confusing credits that are apply to low- and moderate-income taxpayers. In addition to free tax return preparation assistance, most VITA sites also offer free electronic filing.

This service is available in most cases to taxpayers with incomes of $42,000 or less.

VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations. Call (800) 829-1040 toll free to find the VITA site nearest you.

Tax Counseling for the Elderly

The Tax Counseling for the Elderly program, or TCE, provides free tax help to people aged 60 and older. As with VITA, trained volunteers from nonprofit organizations provide free tax counseling and basic income tax return preparation for senior citizens.

As part of the IRS-sponsored TCE program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income, with special attention to older taxpayers.

For more information on TCE, call toll free (800) 829-1040. To locate the nearest AARP Tax-Aide site, call toll free (888) 227-7669 or visit AARP’s Internet site.

If you plan to take advantage of VITA or TCE services, you’ll need to bring the following material, if it applies to your filing situation, with you:

What to bring
  • Proof of identification.
  • Social Security cards for you, your spouse and dependents and/or a Social Security number verification letter issued by the Social Security Administration.
  • Birth dates for you, your spouse and dependents claimed on your tax return.
  • Current year’s tax package if you received one.
  • Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers.
  • Interest and dividend statements from banks (Forms 1099).
  • A copy of last year’s federal and state returns, if available.
  • Bank routing numbers and account numbers for direct deposit.
  • Total paid for day care provider and the day care provider’s tax identifying number (the provider’s Social Security number or the provider’s business Employer Identification Number).
  • To file taxes electronically on a married filing joint tax return, both spouses must be present to sign the required forms.

Follow-up clinics

When low-income taxpayers have tax problems after they’ve filed, they often cannot afford to hire professionals to help them work through the maze of IRS questions.

To help fill this assistance void, schools and nonprofit groups nationwide provide low-cost — and in some cases free — tax clinics, also known as low-income taxpayer clinics, or LITCs. The services are supported in part by financial help from the IRS through its National Taxpayer Advocate office. Each year, the agency solicits applications nationwide from tax clinics, and selected clinics can receive up to $100,000 in matching federal grants.

Personnel and volunteers at these locations are available to represent low-income taxpayers before the IRS in audit, appeals and collection issues and other federal tax litigation for free or for a nominal charge.

Clinics target neediest taxpayers

To get the federal cash, a clinic must provide legal assistance to low-income taxpayers who are disputing an IRS ruling. A clinic that provides non-English-speaking taxpayers advice and guidance on their tax rights and responsibilities also is eligible for the federal money.

The clinics may be run by tax-exempt organizations or by law, business or accounting schools whose students represent citizens in tax disputes. The amount of tax in question must be less than $50,000 and a clinic cannot charge more than a nominal fee for its services.

Grant guidelines also require that at least 90 percent of a clinic’s patrons meet income limits. For the 2008 grant year cycle, those limits were:

Guideline limits
Size of family Earning no more than
1 person $26,000
2 persons $35,000
3 persons $44,000
4 persons $53,000
5 persons $62,000
Families with more than five members should add $8,500 per person.

Separate income guidelines are used for residents of Alaska and Hawaii.

Interest in program grows

The IRS reports that interest in the low-income taxpayer clinic, or LITC, program continues to grow. When the effort began in 1999, only $1.5 million was granted.

For the 2008 grant cycle, the IRS awarded almost $9 million in matching LITC grants to 154 organizations representing all 50 states, plus the District of Columbia, Puerto Rico, and Guam.

The IRS publishes on its Web site a list of the current clinics. You also can use the agency’s interactive map to find a clinic in your area.

Both the text list and map resource provide details on the type of services the clinic offers, the languages that are spoken there and a local phone number that you can call for more information and location specifics.

While the clinics are welcomed by taxpayers who could not otherwise obtain help in sorting out tax problems, clinic sponsors say that their tax-aid volunteers also benefit from the program. A General Accounting Office study found that at tax clinics affiliated with law schools or graduate accounting and business programs, participating students gain educational and practical experience by dealing with real-life clients and preparing cases.

<< Back to Bankrate’s 2010 Tax guide table of contents.

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