Center helps low-income workers tackle tax season, finances

About 1,000 low-income workers in Wisconsin will get free help filling out their tax returns along with a dose of financial education to help stretch their paychecks even further, thanks to the UW–Madison Center on Business and Poverty.

The center is working with the state Department of Revenue, experienced volunteer tax preparers from the American Association of Retired Persons, the Social Development Commission and others to provide the service to businesses, and help workers chart a course for their future finances.

“Tax time is a fantastic opportunity to talk about year-round strategies that allow low-income workers to keep more of their money and manage it more effectively,” says John Hoffmire, the center’s director.

Recently, the center coordinated a tax preparation session for 22 employees of Food Fight Inc., a chain of Madison fine-dining restaurants. Peder Moren, chairman of the board for the firm, says that in addition to saving workers the cost of tax preparation, the program provides valuable information on managing finances.

“John’s program is a good one that’s very well-received among employees. They received many helpful tips,” Moren says. “Truth is, even though we talk about it, it’s very hard for people to understand things like the Earned Income Tax Credit that are available to them.”

Hoffmire says that in a pilot program last year, 10 low-income workers who took advantage of free tax preparation saved an average of $510 over the way they had their taxes prepared in the previous year.

“Lower-income people want to get their taxes done early, because they are the most likely to have a tax refund coming,” Hoffmire says. “Employers love the program. I have never had a company say that they’re not interested in this.”

Tax preparers make sure that eligible workers take advantage of things like the federal Earned Income Tax Credit, which has the potential to increase disposable income for a worker with a non-working spouse and two children by up to 36 percent.

The center also makes sure that taxpayers who take advantage of free tax preparation get money-management tips that could help them build their nest eggs and get more out of every paycheck.

“We provide information about the benefits of using tax refunds to start Individual Retirement Accounts or taking full advantage of 401(k) programs to establish retirement funds,” Hoffmire says.

Additionally, the center urges clients to opt for direct deposit of paychecks, where possible, to discourage use of check-cashing shops. Hoffmire says that avoiding check-cashing shops can boost disposable income by 2 percent, and avoidance of payday lenders could save another 15 percent per pay period.

The center – which conducts research and disseminates information on how businesses can improve the financial well being of their workers – opened its doors at UW–Madison in early 2005, and is an initiative of the UW–Madison’s Institute for Research on Poverty.