New York City’s Department of Consumer Affairs wants to expand interest in free tax preparation services, particularly for low-income New Yorkers who qualify for the Earned Income Tax Credit, by redesigning the sites where they can get Volunteer Income Tax Assistance.
The Department of Consumer Affairs has been surveying New Yorkers about why they choose paid tax preparers instead of the free VITA sites, and partnering with the Parsons school of design on redesigning the sites to make them more useful to taxpayers.
DCA announced the initial findings Friday from its Designing for Financial Empowerment initiative, which aims to develop a new approach to free tax preparation services in New York City. During the first phase of the initiative, researchers uncovered factors that may explain why nearly three-quarters of New Yorkers who claim the Earned Income Tax Credit choose to pay for tax preparation rather than take advantage of the city’s free tax preparation services.
“We are committed to delivering essential services to New Yorkers with low and moderate incomes, who are too often left behind, and to fixing that disparity to help them improve their financial stability,” said DCA Commissioner Julie Menin in a statement. “We’re excited to begin the next phase of this project, and together with industry partners and the community, design a program that dispels the myths and overcomes the challenges identified in the first phase in order to get every New Yorker who is eligible to file their taxes for free.”
Under the initiative, the department hopes to encourage more low-income New Yorkers to benefit from tax credits like the EITC and other financial services by improving the accessibility and effectiveness of the free tax prep services provided by the nearly 200 VITA sites around the city. DCA is partnering with Mayor’s Fund to Advance New York City, Citibank, Food Bank For NYC and Parsons on the initiative for redesigning the sites.
“At the DESIS Lab, we are exploring the relationship between design, social change and policy to foster more equitable and sustainable cities,” said Parsons The New School for Design DESIS Lab Director Eduardo Staszowski. “In our research, as well as in our teaching, service design is considered an advanced approach, one integrating many design and non-design disciplines. The Designing for Financial Empowerment initiative is an example of how public agencies and civil servants can meet with people and other organizations and together design new services and tools to enable working New Yorkers who have low to moderate income to file for free, claim their money and get access to other financial empowerment services they need.”
During the first phase of the project, known as the discovery phase, researchers interviewed site managers, volunteer tax preparers and filers at VITA sites to learn firsthand the challenges and capabilities at the sites. They also conducted extensive field research to better understand why eligible filers do not use these services.
According to the findings, many filers said they have a misconception about who is responsible if they are audited by the Internal Revenue Service. They believe tax preparers are responsible for the accuracy of their returns, so they choose whoever promises the largest refund. Some of their opinions are captured in the Designing for Financial Empowerment Tax Time Video.
In addition, for many of these filers, taking time off work to wait their turn to sit with a tax preparer at a VITA site may be challenging, Childcare can be costly or unavailable, they said, and bringing children to VITA sites can make it more difficult for filers and those around to wait. Filers also believe that because they are free, VITA services are lower quality than paid tax preparers.
In the second phase, known as the co-design phase, the research team is bringing together government agencies, policymakers, community and civic leaders, social service organizations, and local business owners to incorporate the findings and “co-design” potential solutions for new or improved services through a series of facilitated workshops. The goal of this phase is to create a model for VITA sites to be tested in as part of the last phase.
During the last phase, Food Bank For NYC will offer the redesigned free tax prep service and engage with filers and tax preparers to understand their experiences, while making additional improvements based on the feedback they hear. DCA said this would help create policy and an infrastructure to support long-term development of the new model.
In New York City, one in five eligible households does not take advantage of the EITC, which returns an average of $2,500 for low-income families. In addition, one-third of New Yorkers who do claim the EITC choose to pay for their tax preparation, which costs an average of $250, instead of taking advantage of free tax preparation services. Many of these families pay additional fees to gain quicker access to their refunds or defer the upfront preparation fees through products like refund anticipation checks.
This year, New York City invested more than $3 million in its Annual Tax Credit Campaign, the largest in the city’s history, which represents a 20-fold increase in spending; Citi has contributed $665,000 to support several of these initiatives, including capacity-building for VITA sites and targeted advertising in Spanish-language media outlets. The $800,000 advertising component of the tax credit campaign, which will run through April, is nearly five times the investment in advertising as previous years in an effort to reach a broad audience and target messaging to key audiences based on factors, such as income and language access.
For more information on the Designing for Financial Empowerment project, visit DFE.nyc.
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