CFATE provides meaningful tax education and outreach services to individuals from underserved communities. We do this so students, adults, seniors, and veterans are well-informed of their federal tax rights and empowered with the necessary resources to access beneficial tax services and incentives.
CFATE was founded in 2020 by Jordan D. Howlette as a means to address the widespread victimization of low-income individuals in the tax preparation industry. Jordan spent five years as a civil tax attorney for the government where he sought to shut down fraudulent tax preparation businesses around the country. Through this experience, Jordan came to appreciate the overwhelming need for educational outreach services that promoted public awareness of free tax assistance services and helped facilitate access to the services. CFATE strives to accomplish both tasks through various community outreach and education services, but namely its free virtual tax clinic.
Each year, millions of people choose to pay someone to prepare and file their federal income tax returns. This occurs in large part because of a widespread mistaken belief that some specialized tax knowledge or experience is required to accurately prepare one’s own tax return. And some tax return preparers exploit this mindset, especially in low-income areas. To do this, dishonest return preparers first lure customers to their brick-and-mortar stores by using a variety of misleading marketing campaigns, including ads that guarantee $6,000 cash advances or offers of instant cash just for stopping by. They'll usually start these ads in December in hopes of attracting customers who need money for the holidays, knowing full well these individuals will not have their Forms W-2 or Forms 1099 until at least mid-to-late January.
Upon visiting the tax preparation store, the preparer promises to obtain the highest tax refund possible for the customer, which of course makes the customer very happy. Unfortunately, though, to obtain the "highest tax refund possible," a dishonest preparer will report fraudulent or bogus items on the customer's tax return. For example, these preparers may fraudulently claim that: (a) customers attended college and paid tuition (when in fact they did not); (b) customers donated tens of thousands of dollars to charities (even though their income would not allow for such large donations); or (c) customers received income from operating a side business (when no such business existed). Also, these preparers often charge customers an exorbitant preparation fee of anywhere from $300 to $1,000, but purposely do not share the fee details with customers.
Once a return is complete and ready to be filed, the preparer instructs the customer to sign at several different places without thoroughly reviewing the return. Oh, and the preparer usually does not provide a copy of the filed return to the customer even though federal law requires it. Later, if the IRS conducts an audit of the customer's return, the law requires the customer (not the preparer) to pay back any tax, interest, and penalties connected with the fraudulent items reported on the customer's return. The interest and penalty amounts alone cause a substantial financial burden for many low-income individuals who fall victim to these tax preparation schemes. The victims may also miss out on several years of future tax refunds (a vital source of funds for low-income individuals) while the IRS recoups the additional tax, interest, and penalty assessments. But there is an easy solution to this multi-tiered problem.
CFATE seeks to counter the victimization scenario discussed above by empowering individuals with the necessary tools and motivation to prepare and file their own tax returns online. We do this mainly through the operation of our free virtual tax clinic, where certified tax volunteers guide participants step-by-step through the tax preparation process. By leveraging what is known as a facilitated self-assistance model, we provide clinic participants with important tax literacy knowledge that helps further their financial independence. We also promote public awareness of reliable and safe free tax assistance services, namely the Free File program.
What is the Free File program?
The IRS established the Free File program in 2003 as a way of providing free online tax preparation and electronic return filing to 70% of the taxpaying population. Individuals who earned $72,000 or less in 2020 are eligible to use Free File (i.e., which equates to roughly 104 million taxpayers). However, only a mere 2.5 million taxpayers—less than 3% of eligible individuals—opted to file their 2019 returns through Free File, while more than 50 million eligible taxpayers opted for a paid preparer service. Choosing a paid preparer service over the Free File program means that hundreds of millions of dollars are likely being wasted by low-income taxpayers each year on a service that is otherwise easy, fast, secure, and best of all, free. This is why CFATE promotes the Free File program through its free virtual clinic.