Bloomberg Businessweek (CFED)
By: John Tozzi
March 5, 2012
Tax help for housecleaners and cabdrivers
People who need help filing taxes but can't afford to hire a preparer can go to community groups funded by the IRS for free tax prep. Many people who work for themselves can't use the help, though, because the programs are barred from preparing returns with substantial business income.
That's too bad for the 13 million business filers who make less than $50,000 per year (which would normally make them eligible for the help). These self-employed individuals, including people who drive taxis, clean homes, and work as day laborers, can have more complicated taxes than wage employees and could benefit from tax prep.
Since 2006, the Corporation for Enterprise Development has been trying to get it to them. Working with 18 community groups across the country, the Washington, D.C., nonprofit has helped thousands of these business owners with their taxes. Their goal: reach people at tax time and then connect them with other services, such as education or financial planning, to help build more successful, financially sound businesses.
"It's a moment when many business owners are first realizing that they are business owners," says Lauren Williams, program manager at CFED. A lot of these taxpayers are "necessity entrepreneurs" who use informal businesses to supplement their wages, she says. "Not only were people getting their taxes done, but they were receiving much larger refunds through things like the [earned income tax credit]."
Williams's group wants the IRS to loosen the rules so low- and middle-income small business owners can benefit from the free tax help offered at IRS-funded sites. They've even floated it as a way to create jobs.
Rebecca Pear provides low-cost tax prep to small businesses at the Brooklyn Cooperative Federal Credit Union, partly subsidized by CFED. The credit union charges $50 to prepare a return with Schedule C business income. Her clients are a mix of freelance professionals and undocumented immigrants who work in construction or as street vendors.
In addition to doing their taxes, she refers clients to the credit union's other services--for example, helping them open separate accounts for their businesses. "A lot of businesses tend not to have their finances in great shape," she says.