Exclusive: Obama Admin Kills Program That Helped Poor File Taxes, Sends Funding To Liberal Groups

rpollock | Reporter

The Obama administration has quietly killed an IRS tax preparation program designed to help low-income and disadvantaged citizens, choosing instead to give millions of dollars to liberal groups for the same purpose.

Without fanfare, the administration has closed down the free walk-in services at hundreds of taxpayer assistance centers around the country.

Administration officials are now trying to steer the “face-to-face” help to volunteer community groups, some with political ties. But one undercover inspection of those groups in 2013 revealed a 49 percent error rate.

Enjoying bipartisan support, the tax centers had provided service to low-income and disabled citizens, rural dwellers and citizens not proficient in English. Workers earning $49,000 or less got free face-to-face help from IRS employees.

Funding was not an issue for the program. Unlike other parts of the IRS that faced cutbacks, the taxpayer assistance program was left untouched by Congress.

“In enacting the IRS’s budget for FY 2015, Congress spared the Taxpayer Services account from the reductions it made to other IRS accounts,” according to a 2014 annual report by the Taxpayer Advocate Service, a federal agency that represents taxpayers.

The report to Congress was titled, “Taxpayer Service Has Reached Unacceptably Low Levels and Is Getting Worse.”

Even so, according to the IRS, the administration abruptly ended the service in January 2014 without hearings, legislation or a public comment period.

Discontinuing the program has generated a storm of protest from taxpayer advocates who say the poor and disadvantaged are facing increasingly complicated tax burdens, but are getting less help from the Obama administration.

Many tax advocates say ending the service for the poor is the height of hypocrisy for an administration that claims to support the little guy.

“The thing is that this is an administration that pledges itself as trying to help out ordinary Americans, to help out the little guy,” observed Ryan Ellis, the tax policy director at the conservative Americans for Tax Reform.

“I wouldn’t think they would be shutting down an office whose very focus is to help those very people,” he said.

Daniel J. Pilla, a tax litigation consultant, says he considers the elimination of the program “outrageous.”

“We’ve got these people who make every effort to comply with the code. They look to the IRS for help and they’re not getting it,” he argued in an interview with TheDC.

“The decision to not provide the service was a deliberate decision that to me is outrageous,” he told TheDC.

Notably, the taxpayer advocate service of the IRS has condemned the elimination of the tax assistance program.

“[T]he government is largely turning its back on a significant number of taxpayers who require face-to-face assistance to comply with their tax obligations,” the advocate service stated in its 2014 annual report.

The agency added in the annual report that the Obama administration cancelled the program without a proper evaluation of its impact on low-income and disadvantaged people.

“The IRS discontinued tax preparation services at TACs without properly evaluating the limitations of the most vulnerable taxpayer populations – the elderly, low income, rural and those not proficient in English.”

Although they earn low wages, today’s low-income earners face a barrage of complex tax filings because they receive entitlement programs like the earned income tax credit that must be reported to the IRS.

And for the first time, low-income earners now face extra tax filing requirements if they received health-care subsidies under Obamacare. About 7 million tax filers are affected.

“Taxes are intimidating for everyone. I suspect they are especially intimidating for people with lower education levels or lower-income families,” said Elaine Maag, a senior research associate at the liberal Urban Institute, in an interview with TheDC.

The complexity demanded by Obamacare this year was so overwhelming, it caused IRS Commissioner John Koskinen to briefly consider the idea of delaying the tax season.

He lamented last October that this tax year was “the most complicated filing season before us in a long time, if ever.”

As a replacement for the taxpayer assistance centers, the Obama administration has funded community service groups with $12 million in matching grants.

The administration has asked the volunteer groups to perform the same service as those offered by the Tax Assistance Centers. But the staffers are volunteers, not tax professionals.

As it happens, some of the largest grants issued under this program — called the IRS Volunteer Income Tax Assistance program — have been awarded to groups that have political ties to the administration.

Since early in the administration’s first term, Obama officials sought to degrade the capabilities of the taxpayer assistance centers.

The U.S. Government Accountability Officer reported in December 2014 that between 2010 and 2013, the IRS continually reduced its field assistance staff to tax centers from 2,222 to 1,938.

“At the same time IRS eliminated return preparation at TACs, taxpayers increased their use of volunteer sites,” the GAO reported in the same report.

The IRS has attempted to makeup for the reduced service with an online program called “Free File.” But advocates retort that many low-income earners don’t even have access to the Internet.

A May 2013 study by Pew Research Center reported that 18 percent of all American adults don’t have Internet access.

It found the same number applied to high school graduates or those with less education.

Critically, Pew found 22 percent who earned $49,000 or less have access to the Internet, the exact population group targeted by the taxpayer assistance program.

“The net effect of withdrawing this assistance is that many taxpayers will not receive help,” the tax advocate report concluded.

The Taxpayer Advocacy Panel, another independent governmental body, denounced the elimination of the tax service, saying its own 2012 survey showed that disadvantaged taxpayers “still needed face-to-face assistance from a TAC.”

Today, the IRS claims the elimination of the free tax service program merely “was a management decision,” according to Dean Patterson, an IRS spokesman in an interview with TheDC.

He called it a “resource management decision.”

Some tax advocates don’t buy it. They bristle at the idea that the grants, offered under the Volunteer Income Tax Assistance program, may be handed out to politically favored activist groups.

“There is a long history of using supposedly neutral government resources to fund the activists and organizers who have all sorts of agendas,” complains ATR’s Ellis.

“It’s not surprising at all that they would be using IRS resources to essentially subsidize some of these organizations,” he told TheDC.

Over the years, the administration has awarded grants to many non-partisan community groups such as the United Way.

But some of the largest grants are going to liberal activist groups.

After 2011, the IRS stopped publicly publishing its awards to community groups.

But according to grant award data provided exclusively to TheDC by the IRS, the largest recipient is the well-connected and liberal AARP Foundation, which this year received $900,000 under VITA.

Chicago’s Center for Economic Progress received $234,000 under the volunteer fund.

Its president is David Marzahl, a social justice community organizer who was also the founder of the National Community Tax Coalition, a lobbying coalition that sought federal VITA funds.

Another recipient was New York’s Financial Network Consortium, which was awarded $157,000. George Soros’s Open Society Institute founded the consortium in 1998.

The Obama administration meanwhile says it wants to triple funds for the volunteer program.

In its latest budget proposal, the White House asked for $30 million each year over the next five fiscal years. Local activists are seeking $35 million.

But a frequent complaint about the volunteer groups is that they inaccurately process tax returns. The undercover survey, revealing a 49-percent error rate, raised a lot of eyebrows when it was released in 2013.

“We have continually reported that Volunteer Program sites are inaccurately preparing tax returns,” wrote Russell George, the Treasury Inspector General in a September 2013 report.

“The error rates never get better,” notes Pilla. “They always fluctuate around that 50 percent mark.”

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