Filing taxes is an annual requirement that can be confusing, time consuming, and expensive. For a fee, individuals can consult tax professionals or purchase special tax software to sort through the complicated tax code and ensure compliance.

For low-income individuals, these are not viable options. And for those who are self-employed or own small businesses, filing taxes can be an even more complex and expensive task. Yet, unclaimed tax credits can be critical to the survival of a business.

To combat this problem, Community Action Agency of Southern New Mexico (CAASNM) established a tax preparation program for low-income individuals. To ensure the financial security and growth of small business owners and self-employed individuals in the community, the agency embedded two additional services into its existing program—small business development counseling and benefits screening and counseling.

This proactive approach to tax preparation services put hundreds of small business owners and self-employed low-income people in contact with trained CAASNM counselors. It also enabled low-income taxpayers the opportunity to be screened for social benefits eligibility while waiting to complete their taxes.

CSBG funds were critical in running this initiative and allowed CAASNM to manage effectively and staff the project. CAASNM also involved several community partners to make this program successful by collaborating with Dona Ana Community College tax students to prepare taxes and AARP to provide trained volunteers to help with all aspects of the program. The volunteer tax preparers attended tax preparation classes and passed the IRS tax preparation test before assisting with the program. In addition, the United Way provided a grant to support free tax preparation services in Anthony, NM.

CAASNM served approximately 100 individuals each day. While individuals waited, CAASNM offered them the opportunity to meet with a benefits counselor or a small business counselor. The benefits counselor screened eligibility for 16 federal and state benefits, such as the Supplemental Nutrition Assistance Program (SNAP); childcare; Women, Infants and Children (WIC); Medicaid; Supplemental Security Income (SSI); and Social Security Disability Insurance (SSDI).

After the benefits evaluation, the individuals met with a tax preparer to complete the filing of their taxes. For convenience and a better experience, CAASNM’s services are always offered in both Spanish and English. Due to this efficient and convenient collaboration to provide information and services to low-income individuals, over 250 small business owners and self-employed individuals received small business counseling and achieved savings totaling over $250,000. CAASNM screened 600 individuals and families for federal and state social benefits eligibility. Based on follow-up visits, participants who heard about these benefits for the first time at CAASNM’s tax sites received over $559,000 in new benefits.

Finally, CAASNM prepared 7,863 federal and state tax returns for low-income residents of Dona Ana County. Based on these returns, families received $3.2 million in refunds, including those resulting from the Earned Income Tax Credit. Also, participants saved $611,910 in tax preparation fees which could then be used to meet other basic needs.

This proactive and innovative approach of combining tax assistance, business counseling, and benefits screening turned financially straining and stressful times for struggling small business owners into an efficient and informative process which saved them time and money, helped improve their businesses, and set them up for long-term success.

Data sources

• U.S. Census Bureau, “American FactFinder,” 2007 American Community Survey (accessed May 2011). Data came from the following tables: Statewide poverty percentages, GCT1701, Ratio of income to poverty level, C17002
• U.S. Census Bureau, “American FactFinder,” 2009 American Community Survey (accessed May 2011). Data came from the following tables: Statewide poverty percentages, GCT1701, Ratio of income to poverty level, C17002
• Half in Ten analysis of Table 1, 2007 State Expenditure Report, National Association of State Budget Officers.
• Half in Ten analysis of Table 1, 2009 State Expenditure Report, National Association of State Budget Officers.
• College Board Trends in Pricing
• U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2007 through 2008.
• U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2009 through 2010.
• Food Research and Action Center.
• IRS EITC09. EITC09PY Table as of 12/31/10. IRS Master File, posted to IRS website, EIC Participation For Tax Year 2009, by State.