Free tax services help filers save wisely

Marion McKinney, 29, took two buses on a cold Saturday morning in late February to make her way to the Detroit Main Public Library to get her taxes done for free.

But more than 40 people had arrived before her, and the site could handle only so many filers. A volunteer suggested that she go to another location for tax help.

So McKinney took two more buses to get to the Community Tax and Resource Center on Fort Street in southwest Detroit.

I couldn't afford to pay someone to prepare my taxes for me," said McKinney, who is out of a job now but worked last year for a security company.

Free tax sites offered by the Accounting Aid Society, AARP and others give lower-income families a shot at saving from $75 to $150 on tax preparation.

Such groups often provide free electronic filing. Refund money can arrive quickly, and taxpayers can avoid spending another $100 or $150 to get quick cash through a refund anticipation loan.

"This is a big help for me -- for one thing it's free," said Olivia Harrington Nichols, 78, who expects a refund of about $500. She lives on a pension of $328 a month from Great Lakes Steel and $650 a month from Social Security.

Increasingly, there's a school of thought that holds that free tax preparation sites could offer even more -- and maybe turn into one-stop spots to encourage more families to use some refund money for savings or move into the financial mainstream.

The Community Tax and Resource Center is a test site that's paid for with a one-year, $114,600 grant from the Skillman Foundation's Good Neighborhoods Initiative.

It offers free tax preparation using volunteers from the Accounting Aid Society and a mix of financial resources from community partners.

"When you come to a tax site, it's really a true moment of opportunity," said state Rep. Steve Tobocman, D-Detroit, who is involved with the center and volunteers to prepare returns at the site.

Tobocman, the majority floor leader, noted that tax refund money could amount to 5% to 10% of the annual household income for some lower-income families in southwest Detroit and elsewhere.

The federal Earned Income Tax Credit, a refundable credit, can range from $412 to $4,536 this tax season for lower-income working families and individuals who qualify.

The goal for the resource center is to help people make the best use of their refund money.

Those who visit the site can pick up a package that includes financial coupons.

One coupon says $10 will be deposited into a new account if you open one at the Communicating Arts Credit Union. Another coupon offers a free piggy bank when you attend a free seminar that includes information on the Michigan Education Savings Plan and the Michigan Education Trust.

Another coupon offers a free credit report through Southwest Housing Solutions.

And there's a coupon that says the first $5 is free when you join the Dearborn Village Community Credit Union, which is also promoting a new-member deal involving a 10.47% 1-year certificate of deposit. The CD applies only to a $1,000 deposit.

"Our whole business plan is really to partner with southwest Detroit," said Terry Denmark, president and CEO of Dearborn Village Community Credit Union, which has a branch office on Dix Road, near southwest Detroit.

Denmark said about seven people so far have opened accounts with the credit union through the community tax site. A few took advantage of the special CD.

It can be difficult to encourage some families to save.

Barbara Longmire, 49, said she's getting a $200 refund. Even after visiting the site last month, she still doesn't plan to open a bank account. She said she doesn't have enough money to put aside into savings.

"Some people are still afraid to open an account or buy a house," said Maria Mendez, site supervisor at the Community Tax and Resource Center.

Still, Mendez and others are hopeful that materials at the site will one day inspire people to make a financial move.

Kathleen Hatke Aro, president of the Accounting Aid Society in Detroit, said the pilot program offers one strategy for reaching out to people who haven't received much financial education through the schools or their families in the past.

Too much of the financial focus is on spending -- not saving.

"A lot of our clients use their refunds for the immediate needs, utilities, food, clothing," she said.

For some families, there's a great temptation to pay $300 for tax preparation and a refund anticipation loan elsewhere, if they're expecting a refund of $1,000 or $2,000.

"All they see is, 'I'm getting this money right now,' " Hatke Aro said.

But that's money that could be saved and used somewhere else.

McKinney said a free-tax service is a great help -- even if she had to take a few buses along the way. She made less than $7,000 last year.

She will get about $2,100 in refund money, thanks mostly to the Earned Income Tax Credit. It's money, she said, that she'll use for rent, moving to a two-bedroom apartment and raising her 9-month-old daughter, Star.

Other Usefull Tax Articles

Most Viewed Articles