A Closer Look At Low-Income Taxpayer Clinics

La Posada Tax Clinic Director Robert Wunderle discusses the significance of low-income taxpayer clinics to the tax system and the way his clinic serves the Twin Falls, Idaho, group.

This transcript has been edited for size and readability.

David D. Stewart: Welcome to the podcast. I am David Stewart, editor in chief of Tax Notes At the moment Worldwide. This week: medical view.

Throughout the US, there are simply over 130 low-income taxpayer clinics. These clinics, often known as LITCs, assist low-income taxpayers resolve tax disputes with the IRS at little to no value.

However these clinics generally provide extra than simply tax decision providers to the group. Additionally they act as taxpayer rights advocates, tax submitting aids, and even monetary literacy educators.

That’s definitely the case for the La Posada Tax Clinic, the only real LITC in all of Idaho. This clinic in Twin Falls was based in 2004 as a part of the faith-based charity La Posada Ministries, which helps immigrants and momentary overseas staff adapt to life in the US.

I spoke with the tax clinic’s director, Robert Wunderle, concerning the tax clinic’s founding, the position of LITCs in as we speak’s tax system, and his imaginative and prescient for the La Posada Tax Clinic tomorrow.

Now, earlier than we start, I ought to notice that our father or mother firm Tax Analysts is sponsoring a brand new public service fellowship for training tax attorneys to work in public curiosity tax regulation. And for the inaugural 12 months, the candidate will work on the La Posada Tax Clinic. We’ll talk about that towards the top of the interview. If you would like extra info on that, there will be a link in the show notes.

All proper, let’s go to that interview. Becoming a member of me now’s Robert Wunderle, director of the La Posada Tax Clinic. Bob, welcome to the podcast.

Robert Wunderle: Thanks.

David D. Stewart: First off, might you inform listeners a bit about your self and the way you got here to be the director of a tax clinic?

Robert Wunderle: Nicely, that is an fascinating story as a result of I didn’t begin out as an accountant in life. I used to be truly within the Air Drive and retired after 24 years, then went into accounting.

I had been working as a volunteer within the volunteer earnings tax help (VITA) program for a few years after I had a chance to satisfy a Catholic nun who was serving to immigrants and migrant staff in South Central Idaho. I requested her if she would love us to convey a crew in to assist a few of her shoppers with their tax returns. She was thrilled by the concept.

That was again in 2004. As we went by way of that first 12 months, I and three different volunteers got here in each Friday to La Posada to assist Sister Rosemary’s shoppers. Come April 15, there was nonetheless a ready listing. Lots of the those who had been coming in had issues with the IRS. They had been in examination, that they had letters, their exemptions had been being denied, and we continued to work on these issues as we might. We saved coming again each Friday all through the top of the 12 months.

It was into December earlier than we give up for that 12 months. The subsequent 12 months we got here again in January and began over again, the identical sort of factor. In February, I received a telephone name from the IRS Stakeholder Partnerships, Schooling & Communication workplace that oversaw the VITA program that we had been working beneath and mentioned, “You’ve been working manner exterior the field, however there’s a grant out there they usually’re on the lookout for somebody in Idaho, in Boise, and we expect it’s best to apply.” Nicely, I mentioned, “Boise is just not Twin Falls. What is the level if they need somebody in Boise?” Nicely, they satisfied me to use. I utilized for the LITC grant to do the sorts of issues that we had been doing anyway exterior the traces of the VITA program.

They began us off as an schooling grantee. In different phrases, we had been funded simply to assist non-English-speaking shoppers to study their rights and obligations. We received a small grant, about $20,000, to try this.

We went from there and continued serving to folks with controversies. We received manner behind in our reporting for the grants. In 2008, they did not renew our grant. So we had been out of this system, which was truly a aid for me in some extent as a result of the reporting burden was excessive, we did not have a lot funds anyway, and it appeared like this system workplace was by no means proud of us as a result of we weren’t doing issues fairly precisely the way in which they thought we must be.

Nicely, in 2008, this system once more had what they name a “mid-year alternative” for somebody to return in and get a grant. After we had been dropped out of this system, in the course of the 12 months I began getting telephone calls from the native taxpayer advocate workplace from the previous analyst who was working with us within the LITC program workplace. They had been all encouraging me to use once more.

Once more, I used to be reluctant as a result of I by no means felt a substantial amount of consolation in working the clinic the way in which they needed us to. We had been doing controversy and we had solely been funded for instructional outreach. However I used to be lastly satisfied, put in an software. The $20,000 grant grew to become virtually $60,000 for a half 12 months.

One thing was occurring that I wasn’t fairly conscious of, however I found later that (former Taxpayer Advocate) Nina Olson had taken discover of what we had been doing and had been impressed and made the choice to get us again into this system and provides us higher funding.

Now, up till that point, we had been getting folks into submitting compliance, into assortment compliance, into noncollectable standing in the event that they could not afford to pay, serving to of us with particular person taxpayer identification numbers (ITINs) and simply resolving examinations, doing audit reconsiderations.

David D. Stewart: Why do not we flip from the particular of your clinic and speak just a little bit extra usually. I am type of inquisitive about the way you view the position of LITCs usually.

Robert Wunderle: The position of a LITC is principally to assist to present skilled and authorized recommendation and help to low-income taxpayers who’re in an issue with the IRS and might’t afford to rent a CPA or a tax lawyer to characterize them.

Let’s speak about collections, for instance. You have all heard the advertisements on TV, “If you happen to owe the IRS $10,000 or extra, we will settle that for pennies on a greenback.” Sure, that is referring to what’s known as the Supply in Compromise program. In sure instances, it may be settled for pennies on the greenback, however provided that you do not have the belongings and earnings to pay what you owe and you’ll substantiate that.

The $10,000 threshold you hear within the commercials is as a result of the businesses which might be promoting this are charging round a $2,000 upfront retainer charge. I believe I simply noticed as we speak or yesterday a discover from the IRS they think about this a rip-off as a result of the general public that decision in and pay should not eligible for the pennies on the greenback. Just a few may be.

David D. Stewart: Yeah. It appears anyplace the place somebody’s speaking about wiping out a debt and if you happen to pay them they will enable you out, there’s usually some type of scammy high quality to that.

Robert Wunderle: Sure. The opposite factor that we do is, and I’ve talked about this, is advocacy. If we see one thing that’s harming low-income taxpayers, particularly disproportionately.

There’s one proper now that is occurring that I simply received off the telephone with the IRS on. The IRS has what’s known as the On-line Cost Settlement system. Now, that permits you to arrange an installment association on-line. If you happen to would set it up with direct debit and you are a low-income taxpayer, it’s best to be capable to try this with no charge being charged for establishing the settlement.

Nicely, agreements ought to be capable to exit as a lot as 72 months, however the On-line Cost Settlement software program is just not functioning accurately and it does not allow you to go greater than 36 months. It desires far more cash to settle a debt in that shorter time frame than our low-income shoppers pays.

As quickly as we choose up the telephone and attempt to get that very same settlement on the phone, they’re hit with a service charge that they would not be hit if we might do it on-line. The IRS can’t repair that proper now. They do not have the funds to do the IT work that may be essential to reprogram it.

That sort of advocacy is necessary.

One other factor we advocated for a very long time and received nowhere with was having a flag placed on tax numbers, these ITINs issued to kids that had been residing exterior the nation in order that these kids could not be claimed for the kid tax credit score. The IRS did not have the cash to try this both.

They did not fairly say it to us that manner. They informed us that they did not have the authorized authority to do it, which I’d dispute. They’d the authorized authority, they only did not have the cash to do the software program adjustments.

Congress lastly took it into their arms and mentioned, “OK, no kids with ITINs are any longer eligible for the kid tax credit score.” It was that in the event that they lived in the US, they might get it. In the event that they lived in Mexico, they could not.

That is the type of issues that LITCs do. Different LITCs have been very profitable, for instance, in getting different vital adjustments to IRS coverage.

David D. Stewart: Now, does your clinic specialise in serving to migrant staff, or is there different work that you just do as nicely?

Robert Wunderle: We do not specialise in that solely, however we’ve got change into a useful resource all through the nation.

The IRS has finished one webinar on tax regulation associated to H-2A staff, however I’ve gone and spoken at numerous venues on the topic all through the nation, finished quite a lot of shows for the Nationwide Council of Agricultural Employers.

We get calls generally day by day, however a minimum of one per week from both a tax lawyer, a tax skilled, an employer asking how they need to be dealing with tax-related issues for his or her H-2A staff.

We’re serving to H-2A staff all through the nation as a result of plenty of the businesses that we have reached out to now put our contact info in packages that they offer to their employers. These are the businesses that truly assist recruit the farm staff.

We’ve change into nationally often called a go-to place to get good info on tax regulation concerning the H-2A employee group. However we do all the pieces else that every one different low-income taxpayer clinics do along with that.

David D. Stewart: In your time on the tax clinic, what would you say is essentially the most difficult challenge you have been offered with?

Robert Wunderle: Most complex . . . There’s one which involves thoughts was a state challenge.

I had a consumer are available in who had not filed for a few years. Enterprise had gone beneath, received concerned in medicine, did a while in jail, got here again out, and had big money owed with the IRS and the state that started when the IRS did what they name a “substitute for return.”

On this explicit case, we received the federal resolved and brought care of, however we had been having an issue with the state. They’d finished their very own substitute for return. It did not matter how you probably did it on the state substitute for return, they only, in our opinion, had finished it improper.

We proposed them two or three totally different other ways to reconstruct the couple’s earnings and identified that the auditor who had reconstructed it had taken 1099-MISC varieties that had been issued by the totally different farms these folks had been working for and getting funds from and added these 1099-MISC experiences of earnings to the earnings that they had assessed primarily based on prior 12 months tax returns. That is considerably difficult as a result of while you do a Schedule C enterprise return, you embrace in it all of the 1099-MISC varieties plus any money that wasn’t reported to the IRS as your earnings.

The state tax fee had taken a base 12 months and extrapolated that into future years. The bottom 12 months included the 1099-MISC in earnings from these years. However within the extrapolated years, they added the 1099-MISC to it.

It was a case that took us a 12 months or so to resolve. It needed to go to the state tax fee. They lastly agreed that the levies that these folks had been paying for a few years had greater than paid what the true legal responsibility was and the case was dropped.

That was one which was tougher than most. There have been a few others.

Proper now, I am having a senior second.

David D. Stewart: Nicely, that is fairly all proper. That sounds fairly difficult, in order that’s a very good reply to what I requested.

In your time on the clinic, is there a case that you just look again on as one thing that you just resolved that makes you proud? You are simply actually joyful that that is one thing that you just had been in a position to get to a decision on.

Robert Wunderle: We had one fellow are available in pretty not too long ago, and he has a disabled daughter who has epilepsy and he or she has a baby. He had been submitting with claiming his disabled daughter and his grandchild on his tax return. As a result of the kid was disabled, he was claiming her for the earned earnings credit score. Within the tax provision, that is an allowable factor. However if you happen to’re audited, you’ve gotten to have the ability to reveal that the kid is disabled.

That is an immigrant from Peru. His English is proscribed. A number of instances he would go to his physician and ask for correspondence and the physician’s workplace would write one thing. The primary time they only gave us a notice on a prescription pad. It by no means fairly mentioned what the IRS needed it to say. So we continued to return two or thrice to the physician, and it took us a few 12 months and a half to lastly get one thing from the medical supplier in a format that the IRS would settle for.

Just some months in the past, they lastly launched his refund from 1999.

David D. Stewart: Wow. That is a very long time to resolve a problem. OK. That is spectacular. All proper.

Turning to a extra normal query once more, what do you see as one thing that the IRS must be doing now to higher help low-income taxpayers?

Robert Wunderle: I believe they should take a protracted, laborious have a look at the filters they’re utilizing for his or her numerous packages. The integrity verification operation the place folks should name in and establish themselves appears to me {that a} disproportionate variety of low-income persons are being hit within the filters which might be freezing refunds or slowing issues down. Once more, it hits farm staff fairly closely.

After they name in, the IRS is anticipating them to have information with a credit score bureau that they will confirm who they’re, and but individuals who come up yearly as a visitor employee and lots of undocumented folks which might be residing right here as residents however have ITINs do not have credit score information. In Idaho, they can not even get a driver’s license in the event that they’re undocumented.

These persons are extraordinarily challenged in proving who they’re, and oftentimes they can not do it due to the techniques which might be arrange. The IRS says go right into a tax workplace. Nicely, there aren’t that many tax workplaces round. Particularly in rural areas the place they will go in, they should make an appointment.

For undocumented folks, it is usually in a federal constructing the place they’re in danger as a result of they do not have identification to get in. For a visitor employee, they should depend on an employer to get the time without work and the transportation to go someplace.

It will be good, I believe, if the federal authorities would cooperate with a few of the state tax workplaces and permit them to enter a state tax workplace and get that verification. In spite of everything, the federal authorities and the states have many agreements wherein they alternate info on a regular basis. That may be a technique that they might make it simpler for folks to confirm their identities after they get caught up in one among these filters.

David D. Stewart: OK. I’ve one other query about your time working this clinic. You have been doing it for some time now. Have you ever observed any traits of issues getting higher or worse for low-income taxpayers?

Robert Wunderle: Oh boy. I believe the pattern has been occurring for years. It impacts everybody, however it impacts low-income taxpayers essentially the most as a result of if they’ve a refund frozen, or in the event that they’re having issues with the IRS they usually cannot get it resolved, they endure a monetary hardship which may be simply an inconvenience for somebody who has higher assets than they do.

For the previous decade or extra, the IRS’s funding has been lower. Their variety of staff they should do the job has gone down. They have been tasked to do increasingly more and extra. As I am positive you are conscious within the final couple of years with COVID-19, it has change into horrendous. We’re now generally ready a 12 months or extra to get solutions to correspondence.

After we attempt to work with somebody and work with the IRS, it is exceedingly troublesome to get info despatched in, get it taken care of, and get a response again. Oftentimes, they find yourself in collections. You may get a group maintain for 30, 60, generally 90 days. But when it takes six months for the IRS to reply the letter you despatched them explaining why they should not be in collections within the first place, you need to preserve going again or the notices preserve coming.

David D. Stewart: Now, I discussed within the intro, however it’s price repeating to be completely upfront about it. Tax Analysts is a sponsor of the Tax Analysts Public Service Fellowship.

So, Bob, might you inform our listeners a bit about that friendship and what you are on the lookout for in candidates?

Robert Wunderle: What I am on the lookout for is a succession plan. I began this clinic virtually 18 years in the past. I’m now, I simply celebrated my 80 birthday some time again.

David D. Stewart: Congratulations!

Robert Wunderle: So, I’m on the lookout for somebody to return in right here and preserve this clinic alive for the interval of the fellowship, and that may give us time, I hope, with me nonetheless on board, to boost extra sources of funding in order that we will preserve the man on board because the clinic director into the longer term and preserve a LITC working in Idaho. Proper now, we’re the one one.

David D. Stewart: Nicely, Bob, it has been nice speaking to you. Thanks very a lot. Thanks for all the work that you just’re doing on your group.

Robert Wunderle: Thanks, sir. And thanks Tax Notes and Tax Analysts for the fellowship. It was a godsend after I was speaking to the American Bar Affiliation and this got here up.