California is BROKE!! The state legislative analyst has suggested that we will have a 10 billion dollar deficit. And the legislature is gridlocked on how to solve this. One item everyone agrees on is the fact that there just isn’t any money. One thing we know is that if the state can collect more money, we will go a long way to fix this situation. Currently, there are two free programs that are offered by the state to help taxpayers file their returns,
Ready Return and CalFile. The Franchise Tax Board says that Ready Return and CalFile do work and that they pay for themselves. But when we take a harder look at the operating expenses, we must really evaluate whether or not this is a good idea that needs help. So why are we spending dollars that we don’t have on a program that probably doesn’t work? If the answer is because that’s the way it’s always been, then we need ask our legislation to fix the problem.Ready Return is something that needs to be re-evaluated. There were only 54,000 out of 2 million possible Ready Return users. That’s a 50% drop from last year’s participation. The current Ready Return and CalFile programs are available to only 44% of California taxpayers. Add to this the advertising costs to promote the Ready Return and the staffing costs, and you have a department that could be outsourced to the private sector.
The solution is the Free File program established by the federal government under former President Clinton’s administration. In 1999 the IRS, under Clinton, understood the importance of allowing taxpayers “one stop shopping” when preparing and filing their federal and state tax returns. The Free File proposal in front of California would provide state-of-the-art tax preparation and e-filing for up to 70% of all California, plus 100% of Californians would be eligible to prepare and e-file using the Fillable Forms program.
The IRS established a partnership with 19 different tax software companies, the “Free File Alliance”. Under the program, these companies provide free access to their tax preparation software and e-filing systems to the lower 70% of all taxpaying citizens. Twenty-one states also participate in this program, providing one stop tax preparation for state and federal returns.
It should also be noted that Free File, by coordinating preparation of federal and state returns, can help to maximize low-income taxpayers claims for the federal Earned Income Tax Credit (EITC). The Franchise Tax Board itself has indicated that California taxpayers fail to claim over $1 billion annually in EITC claims. This is revenue sorely needed by our low-income taxpayers and every effort should be made to increase claims for this credit. The Franchise Tax Board will eventually ensure that you get all your benefits coming to you but it will be a long process, especially when the state is in the financial situation that it is currently in.
As a Latino community we must look out for each other. Our Latino business owners need to educate our employees and our businesses that they are receiving their tax credits that are due them. We must also make sure that the state is held accountable for programs that do not work and put them in the hands of those that will assist our community and the working poor.
Sandy Cajas is President/CEO of the Regional Hispanic Chamber of Commerce.