Why do low-income families use paid tax preparers?
Many low-income families do not have to file federal income tax returns because they owe no tax, but not filing can cost them tax benefits such as the earned income tax credit (EITC). Those who do file often need help preparing their returns, which nearly always comes from a paid preparer. Getting that help-and associated services such as refund anticipation loans (RALs)-erodes the value of the EITC and other refundable credits for these families. That cost might be worth bearing if preparers help their clients claim tax benefits that otherwise might be missed, but evidence suggests that some families who use paid preparers and qualify for the EITC still fail to claim the credit. On the other hand, some preparers not only do inform their low-income clients of their EITC eligibility, but further help them by identifying nontax forms of assistance for which they might qualify, and some even assist in the application process. • A majority of low-income families that file tax returns recei
