Public Charge Rule Letter

Michael Dedmon | Policy Manager | The Financial Clinic

 

Samantha Deshommes

Chief, Regulatory Coordination Division

Office of Policy and Srategy

U.S. Citizenship and Immigration Services

Department of Homeland Security

20 Massachusetts Avenue NW

Washington, DC 20529-2140

 

10 December 2018

Re: DHS Docket No. USCIS-2010-0012 Inadmissibility on Public Charge Grounds

 

Dear Chief Samatha Deshommes,

 

First, I want to say that I appreciate this opportunity, on behalf of my organization, to comment on the Advanced Notice of Proposed Rulemaking (ANRP) regarding changes to the Inadmissibility on Public Charge Grounds. My name is Michael Dedmon, and I am the Policy Manager at the Financial Clinic, a New York City-based non-profit organization that fights financial insecurity  in low-to-moderate income communities through delivering direct services, capacity building for other nonprofits, and supporting systems level solutions and innovation. The Clinic and our partners are privileged to serve thousands of individuals from over 40 states who are themselves immigrants to the United States, and thousands more who count immigrants among their family, friends, and neighbors.

Many of these people have lived in our country before and been a vital part of our society for years, and with the proposed rule changes would face the prospect of being denied legal permanent residence or green card status as a result of their receiving support through programs like SNAP or Section 8 Housing Assistance. The suggestion that immigrant members of our communities are less deserving of obtaining permanent residence in the United States because they have received these supports is misguided, discriminatory, and cruel. In the strongest terms, I urge the Department of Homeland Security to withdraw the proposed “Inadmissibility on Public Charge Grounds” rule CIS No. 2499-10, DHS Docket No. USCIS-2010-0012.

The Financial Clinic has had the privilege of serving financially insecure low-and-moderate income communities in New York City since 2005. During that time we and our national partners have provided one-on-one financial coaching to over 48,000 individuals, many of them immigrants to this country, assisting them with identifying personal financial goals, creating a budget, accessing banking services or credit, and filing their taxes. Everyday our financial coaches see the challenges our customers face in building fulfilling and financially secure lives; challenges that are often only slightly, if meaningfully, mitigated on the support of public benefit programs like SNAP, Medicaid, and Section 8 housing assistance. Our experience serving our customers shows us that these programs give low-income families a necessary foundation on which to build financial capability, and rely on the support of federal and state programs for essential healthcare, nutrition, and shelter. Many of these beneficiaries are children or elderly. The proposed rule would force millions of individuals and families to choose between building the foundation for a better life, more financial security, and future success and gaining permanent legal residence. We should all see the cruelty in forcing our friends and neighbors to make this choice just because they are immigrants.

The nature of this false choice also makes it impossible to ignore its racial dimension. Because this rule targets elements of the family-based immigration system, it will certainly have a disproportionate impact on people of color by forcing them to forgo health and nutrition for themselves and their children. Taking into account resilience on such a wide set of public support programs for permanent residency, applications will necessarily reduce the diversity of immigrants entering and remaining in the United States, reshaping our country’s demographics for generations. The language used by the current administration lays bare the radicalized motivation of these proposed rule changes, and should cause all of us to be weary of their intent.

Immigrants do not take from this country, they enrich it. The proposed rule change is part of a larger agenda aimed at radically changing our legal immigration system with the goal of redefining who deserves to be an American and further stigmatizing reliance on any public benefit programs. The proposal sends the message to the world that the United States does not value our immigrant neighbors who work hard to build their lives here, relying on the same system of support that natural born citizens use every day. This message not only demeans members of our communities, but it will also certainly discourage others from immigrating and adding their talents to our society in fear that they may fall on hard times. The Financial Clinic firmly believes that when immigrants are harmed, we are all harmed. We cannot support this harmful rule change.

Thank you for your time and consideration.

 

Michael Dedmon, Policy Manager

The Financial Clinic

 

 

 

Top Tips for Helping Customers Plan a Cost Effective Vacation

Drew Furnari | Financial Coach | The Financial Clinic

 

Summer is vacation season, and while going on a trip may not be a top priority for customers, it can actually be an amazing financial goal. Positive habits, like saving and budgeting, are often built into the trip planning and booking process; and because traveling is nowhere near as expensive as it once was, the goal of going on a trip can be achieved sooner than say the longer-term goal of buying a house. Setting shorter-term goals help bolster customers confidence, and the reward of a vacation encourages them to keep their new positive financial habits.

Once your customer feels they are ready to book their trip, figuring out travel arrangements, accommodations, and activities that fit into their budgets, can seem like a daunting and expensive task. Luckily, traveling and booking travel is not what it used to be. With the help of technology, it is possible to book trips online without the help of a travel agent, and there are more cost-effective options than ever. 

Here are some tips to help keep the cost of a dream vacation down.

 

Travel Arrangements

Travelers tend to assume distance is what determines how expensive a flight is. While distance is a factor, it also depends on how busy the route is. For instance, there are many flights from JFK (New York City) to LAX (Los Angeles), and many airlines to choose from, making it easier to find a relatively inexpensive flight. Meanwhile, Nantucket is much closer to New York City, but it’s a less busy route and can be expensive. Websites like  SkyScanner or Kayak help you see different flights from different airlines and airports all on one page. This allows travelers to compare prices and experiment with different flight connections, airlines, dates, and times. 

Accommodations 

Apartment shares such as Airbnb or VRBO, allow people to rent rooms or whole apartments. While the room or apartment may not have the same perks as a hotel, the accommodations are often more affordable. It goes without saying there can be a downside to this type of lodging. Be mindful of the unit you are renting and look at the reviews. 

Activities

Many museums and attractions have designated evenings where admission is free. Planning a visit during those dates and times gives travelers the opportunity to see important cultural touchstones and to get a bit of free entertainment during their trip. Local tourism websites and centers are a  great way of finding out about free activities happening in the area.

Timing

Summer is peak travel time because it is when the kids are out of school and many families are taking their vacations. If a customer doesn’t have kids or is not planning on taking their children on a trip, traveling during the Fall or Spring can offer many more cost-effective options depending on the location. 

 

Setting a financial goal is an important step in the coaching process. Travel is a goal that you may hear from your customers, and we urge you to encourage them to start working towards their dream trip as a way of building positive, long-term financial habits. Additionally, there are several mental health benefits to traveling. Studies show that a change of scenery can be a huge stress reliever. Share some of these tips with your customers to help them get the most out of their trips. 

A Guide to 529 College Savings Accounts!

Quinton Cannon | Financial Coach | The Financial Clinic

Robert F. Smith made national headlines in May when he announced that he would assume responsibility for the student loans of the entire graduating class of 2019 at Morehouse College. The graduating seniors were momentarily in shock before erupting with celebration. At the same time, college students – future, current, and prior – all around the nation surely felt envious as the story dominated their newsfeeds and social media accounts.

Just a few weeks before, Elizabeth Warren’s proposal to erase a significant portion of outstanding student loan debt sparked conversation about how different people’s financial situations would look if they were ridden of their student loans.

Notwithstanding the exciting (or envy-invoking) headlines about loan forgiveness, it’s critical for future students to save for school. As a financial coach, I often tell people that although we hope that relief of some form is on its way for students and borrowers, it is wise to plan for the future with the assumption that college is going to be expensive and that students will need to find a way to pay for it. So, when possible, it is a good idea for prospective students and their families to start saving now.

529 Plans

An excellent way for many families to save for college education is with 529 plans.

However, in my experience talking with customers, friends, and family about paying for college (yes, I am that weird person who talks to you about this kind of thing at parties), I have found that most people do not know about these plans or their benefits. When people do know about them, they often don’t fully understand how they work and/or have a few misconceptions.

So, let’s talk about what 529 plans are and analyze a few common myths surrounding them.

Why the Name?

Like 401(k) retirement accounts, 529 plans get their strange name from a section in the Internal Revenue Code 26, in which this particular education savings plan is defined. (The IRS has never had a reputation for using memorable or fun names).

What Are 529 Plans?

Also, like 401(k) accounts, 529 plans exist to incentivize Americans to save their future by providing tax benefits to those who use them. There are two types of 529 plans: education savings plans and prepaid tuition plans.

  • An education savings plan allows participants to save in an account where their money can be invested and subsequently withdrawn without the account owner having to pay taxes on gains (as long as the funds withdrawn are used for qualifying education expenses).
  • A prepaid tuition plan allows participants to purchase future credits at participating schools for what those credits would cost today.

Education savings plans are much more common – while almost all states offer an education savings plan, only 18 states offer prepaid tuition plans, and as of last year only 11 of those were accepting new enrollees. So, in this post, I will focus on education savings plans.

How Do 529 Plans Work?

529 education savings plans generally consist of an investment account in which enrollees can choose what type of portfolio they wish their money to be invested in. They can contribute to the plan as frequently (or infrequently) as they like.

When somebody enrolls in a 529 plan, they can either do so for themselves or for a beneficiary (i.e. somebody other than themselves that they are saving for). If they have multiple beneficiaries for whom they would like to save, they can enroll in a 529 plan for each one – it is not possible to have multiple beneficiaries on one plan. When the person for whom the plan is intended needs to use the money, it is pulled out of the 529 plan and used to cover “qualified expenses” (including, but by no means limited to, college tuition). A penalty is charged when 529 accounts are used for non-qualified expenses.

There is no uniform 529 plan across the country. Instead, states are responsible for offering and administering their own 529 plans. Each has its own incentives and benefits – some offer better deals to enrollees than others. Utah and New York, for example, have received a lot of national attention for their respective 529 programs.

While the default option would be to enroll in the 529 where you live, it’s actually possible (and sometimes a good idea) to enroll in a 529 plan outside of your home state.

How Do I Go About Choosing a 529 Plan?

The three main things to consider when looking at 529 plans are: additional tax benefits, fees associated with the plan, and investment options in the plan.

As mentioned above, the first plan to research is generally that of your home state. This is because many plans offer state income tax deductions to residents who participate in the plan – that is, contributing to a 529 plan can lower how much you owe in taxes at the end of the year. However, some states do not offer any tax incentive. Also, some states’ plans charge high fees and/or do not have many investment options. In either of these cases, it might make sense to research other states’ plans to find one that has low annual fees and good investment options.

Why Are 529 Plans Often a Good Idea?

Financial advisors often quote Einstein as having said, “Compound interest is the eighth wonder of the world.” While it’s doubtful that he actually said this, the point remains: money has an amazing way of growing over time and, whenever possible, it is nice to be the one earning this interest instead of paying it.

529 education savings plans provide a great opportunity to capitalize on compounding interest and put it toward something you care about. The earlier you begin contributing, the more powerful the effect of compound interest.

What if the Beneficiary on a 529 Plan Doesn’t Go to College?

If your beneficiary ends up choosing not to pursue a college degree, there are several alternatives.

529 plans can be used to pay for certain non-college expenses without incurring a penalty. For example, funds from a 529 plan can be put toward many vocational or trade schools.
The beneficiary on a 529 plan can be changed. Say, for example, that you had created a 529 for yourself but decided not to attend school; if you would, however, like your daughter or son to have the opportunity to do so, you can transfer the account to them.
You will not lose all of the money you saved if it is used for non-qualifying expenses. Although the money in a 529 plan does come with strings attached, it is yours, and you have the right to use it for non-qualified expenses. Bear in mind that if you do so, there will be a fee, and you will have to pay taxes on any of the accrued gains.

Do I Have to Use My 529 Education Savings Plan for a School in My Own State?

Many people think that funds deposited into a 529 educational savings plan must be used at a university in the state that the plan is associated with. Thankfully, this is not true. The entire balance of funds accrued in a 529 education savings plan can be used at colleges and other educational institutions throughout the country, regardless of which specific education savings plan the funds are stored in.

What Are Some Problems with 529 Plans?

Having highlighted some of the benefits of 529 plans, it’s important to recognize some of the drawbacks of these plans. These generally have to do with the way that the 529 system is set up – there is a lot of room for differences between the way states and different federal programs treat 529 accounts. Two important problems to consider are asset limits and quality of 529 plans.

Asset Limits

Many families worry about the effect that opening a 529 account will have on their access to public assistance programs as well as financial aid for school. Sadly, this is definitely a cause for concern. Although many state and federal programs specifically exclude 529 accounts when considering whether an individual or family should qualify for a certain benefit, others, unfortunately, do take 529 accounts into consideration and this can impede some individuals from accessing certain types of assistance that they need. It is frustrating that we as a nation continue to disincentivize people from investing in themselves and their future, but for the time being some programs still fall into this archaic way of thinking.

529 accounts are also considered, to an extent, in determining financial aid awards to students when they fill out a Free Application for Federal Student Aid (FAFSA). The effect is generally relatively small. However, there are some potential snags to consider – for example, 529 accounts owned by students’ grandparents are treated differently than those owned by the students’ parents.

It is worth noting that student loans often make up a significant portion of financial “aid” packages, so sometimes reduced financial aid is mostly a reduction in student loans that need to be taken out to pay for school, which is a positive.

Not All Plans Are Created Equal

Some recent news articles, such as this one, have highlighted that some 529 Education Savings Accounts are not as good of a savings option as they should be because of the high fees that they charge. For this reason, it is important to try to find a 529 plan that has relatively low fees.

Making 529s Accessible to All

Enrolling in a 529 plan for yourself or a loved one is often an excellent idea. Putting away tax-free savings and taking advantage of compound interest can make college more accessible for future students and help mitigate the crushing debt burden that the majority of college graduates are now bearing.

There are exciting initiatives taking place all over the country to expand 529 plans and increase the public’s use of them, such as the Refund529 program signed into law in New York State in 2016. However, more can and should be done to make this program more accessible to low-income families by continuing to restructure asset limits for public assistance programs and other safety nets designed to help those most in need.

Please join us in advocating for the expansion of 529 plans and a reduction of asset limit tests that impede people from enrolling in them. And while you’re at it, consider enrolling in a 529 plan yourself.

Making Homeownership Possible: Resources for Customers Looking to Buy a Home

Gloria Diaz | Financial Coach | The Financial Clinic

HOME OWNERSHIP IS POSSIBLE!

Homeownership is an important way to build wealth and pass it on to future generations. However, owning a home can seem like an unreachable dream for many customers, especially with the current reality of wage stagnation. According to The Pew Research Center’s, report on wages and purchasing power of the average American:

“Despite the strong labor market, wage growth has lagged economists’ expectations. In fact, despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers” Desilver, 2018.

Statistics like these can make many customers feel like homeownership may just be a pipe dream. Despite dismal statistics, there are a few resources out there that can make this dream a reality.

The Department of Housing and Urban or HUD offers grants and programs that allow for more flexibility than traditional paths to homeownership. Programs like HomeFirst Down Payment Assistance are available in all 50 states. They allow clients to purchase their first home with less than 20% of the down payment (in some cases even less than 10%) and can also offer flexibility with credit requirements. Depending on the consumer and the program being offered, help towards downpayment or closing costs are also offered.

On top of the state programs, HUD also offers specialized programs that include:

To participate in these programs, customers have to complete a home buying course. It is a requirement, however, they are offered for free or at a low cost. They walk the client through every aspect of the home buying process, providing a strong foundation and understanding of the financial requirement needed so they can handle the large monetary commitment.

Although such programs offer flexibility, the basics of financial health still apply. Some questions to consider when speaking to a customer who is interested in owning a home are: is your customer fiscally ready to be a homeowner? How is their credit and credit history? Are there any issues that need to be addressed on any of their reports? How much can they afford to buy? That break down should include all debts and spending costs. How much of a down payment do they need to save for? What strategies can I suggest to help them meet their savings goal?

Here are a few Change Machine’s tip sheets that can help with this process:

These are great tools for coaches to get the conversation about homeownership going, and begin to build a road map for customer goals.

The dream of owning is possible, with determination, planning and creative thinking, we can help make our customer’s dreams come true.

A Guide to Helping Your Customers Tackle Their Debt

Justin DeBrosse | Manager of Service Delivery | The Financial Clinic

It’s not uncommon for a customer to come into a first meeting feeling overwhelmed. Most customers already have a general idea of what their situation is – it’s very rare for someone to see their debt, their credit score, and so on, and have no idea how they got there. A lot of the time, they just don’t know where to start when it comes to tackling their debt. That’s where we come in! This blog post will lay out the process of debt planning and provide some tools and resources you can use to help guide your customers towards the right plan to tackle their debt.

Step 1: Gather all of the information in one place

When it comes to planning for debt, it’s important to have the key information about each piece of debt in one place. Before you meet with your customer, ask them to bring the following information:

  • Name of the creditor
  • Type of account (loan, credit card, charge account, etc.)
  • Account balance
  • Minimum payment
  • Interest rate

A lot of this information can be found on a customer’s credit report, but not all of it. For example, interest rates can only be found on credit card statements or through a companies’ online customer portals. Federal student loan information can be found at http://nslds.ed.gov/, and private student loan information can be found by logging into accounts for each private loan servicer. Gov’t related debts, such as back taxes, child support, or civil judgments can require more digging. Information on taxes owed can typically be found by creating an online account with the IRS, most states have customer service portals where customers can find their child support balances (here’s Ohio’s, for example), and civil judgments can be found by searching through the website of the court in which the judgment was issued. Have your customer use the Debt Management worksheet, or a similar tool, to track the important information about their debt.

Alongside gathering this information about your customers’ debts, take the time to work with your customer to develop a spending plan. How much money do they have coming in each month? How much money is going out? Where’s it going? How much money is left at the end of the month for saving or paying off debt? Before your customer can come up with a plan to tackle their debt, they need to have good answers to these questions. If they don’t know much they’re spending each month, and on which expenses, they won’t be able to figure out how to change their spending to increase what they can put towards their debt. You can use the Daily Expenses and Monthly Income and Expenses worksheets with your customer to organize and calculate their expenses. Then, brainstorm with your customer which expenses can be reduced.

Now that your customer knows all of the important information about their debt, and how much money they can use each month to pay off their debt, it’s time to figure out how paying off debt fits into your customers’ other needs and priorities.

Step 2: Prioritize

Where should your customer start? The “Which Bills Do I Pay First?” tipsheet is a great starting point for coming up with a plan. Your customer wants to make sure their regular expenses are covered, and that they have money set aside for the future before they start putting more money towards their debt. Prioritizing monthly expenses helps to ensure that your customer doesn’t run into issues when they’re unable to pay for rent, utilities, food, or another important expense due to inability to pay. Setting aside money for the future ensures that your customer is able to handle unexpected expenses or variance in income. If either of these are currently an issue for your customer, seriously tackling debt may need to be delayed until their regular monthly expenses are met and they have an emergency fund saved up. Of course, your customer should continue to make all debt payments on time, they just may need to wait to begin putting more money towards their debt.

Step 3: Strategize

While paying down debt may need to wait, your customer can come up with a strategy for whenever they are ready. Exploring options now will arm your customer with the tools they need when the time comes. Here are a few options worth considering:

  • Balance transfers or debt consolidation loans
    • If your customer has good credit, and the issue is more the amount they have to pay, a no/low-interest balance transfer or a debt consolidation loan with a lower interest rate may both be good ideas. With balance transfers, a customer may be able to significantly lower the amount of interest they’re paying, saving hundreds or thousands of dollars over the life of the debt. Typically, the cost of a balance transfer is a 3-5% transfer fee based on the balance being transferred. Debt consolidation loans allow customers to consolidate multiple accounts with debt into just one account, often with a lower interest rate, again saving money over the life of the debt.
  • “Snowball” vs. “Avalanche
    • Once your customer has gotten their debt in order, it’s time to choose the best way to pay down the debt. Two common strategies are “snowballing” and “avalanching. When you “snowball” debt, you tackle the smallest debt first. Once the smallest debt is paid off, you use all of the funds that were applied to that debt to pay off the next smallest debt, and so on, until all debt is paid off. Over time, this method reduces the number of payments a customer needs to make each month. When you “avalanche” your debt, you pay off the debt with the highest interest rate first. This option saves the most money. More information can be found in the “Plan to Get Out of Debt” tip sheet.
  • Debt Management Plans
    • When the interest and monthly minimum payments are just too much for your customer to handle, a debt management plan may be a good idea. With a debt management plan, a third party company (most/all reputable debt management companies are nonprofits) negotiates with your creditors to lower the interest rates for accounts with high-interest rates and balances, saving your customer a significant amount of money over time. A customer pays the debt management plan company directly, and the company then disperses the funds to the customer’s creditors. More information can be found in the “Debt Management: Pros and Cons” tip sheet.
  • Bankruptcy
    • If your customer’s debt is just too much for them, and none of the above options are available, they may be considering bankruptcy. The “Bankruptcy: Is It Right for Me?” tipsheet provides answers to some of the most common questions around bankruptcy, and can be a good starting point for your customer. It’s very likely that you, the financial coach, are not qualified to tell someone whether or not they should file for bankruptcy – and even if you do have some knowledge, they’ll likely need a lawyer to support them in the bankruptcy process. Your best strategy here is to refer your customer to a low-cost legal clinic or another service that can help them take a closer look at their current financial situation and determine if filing for bankruptcy is the best way to move forward.

Step 4: Take Action!

Your customer has gathered the information, analyzed their debts, and come up with a plan. Now it’s time to get moving! Since your customer likely has several steps they need to take, work with them to organize a list of the steps you have already laid out to get closer to getting their debt under control! Depending on the complexity of your customer’s situation, you may need to check in on their plan periodically to update the action steps and reassess as needed. This is also a great opportunity to take a moment to celebrate the hard work your customer has done, and how much money they’ve saved through the steps they’ve taken!

Tax Time Kickoff Series: Part III-How Can I Plan for Changes to My Refund?

As we kick off tax season, the Center and Budget and Policy Priorities’ Get It Back Campaign and the Financial Clinic have teamed up to help you sort through what tax reform might mean for your refund, and what you can do to make the most out of tax time. This the final post in this three-part series.

If your refund is higher or lower than expected:

Be sure to adjust your tax time saving and spending plans accordingly. The recent tax reform changes impact the amount of taxes that need to be withheld from paychecks over the next few years. You may want to use this tool to see if you need to change your tax withholdings to plan for next year’s tax time.

Form W-4 is used to adjust the amount of taxes withheld from your paycheck. You can adjust your Form W-4 with your employer(s) to get your refund throughout the year, or to get a larger refund at tax time. You may prefer a smaller tax refund to get more of your money throughout the year in each of your paychecks. Or, you may find a larger tax refund useful to help “automate savings” once a year.

If you owe the IRS or your state after filing your return:

If you owe unexpected tax, know that you have several options to pay it. You can pay at the time of filing and up to the April 15 filing deadline. If you cannot pay the full amount, pay what you can to minimize interest and penalty charges. Let your tax preparer know that you would like to set up a payment plan. They can help you complete Form 9465, Installment Agreement Request. IRS charges interest and fees while you are on a payment plan, but tend to be very flexible about helping you with a payment amount you can afford. If a payment plan will cause financial hardship, you may be able to settle your tax debt for less than the full amount or request the IRS temporarily delay collection until your financial situation improves.

Low-Income Taxpayer Clinics (LITCs), typically help with addressing IRS-related tax disputes and can help with audits, tax collection matters, and reducing fees or penalties if you are eligible. Call your local 3-1-1 or 2-1-1 to find the nearest LITC near you. A financial coach can also help if you have questions about developing affordable payment plans or reaching out to IRS.

To avoid owing taxes next year, follow the steps above to make adjustments to your Form W-4. Increasing your withholding means each of your paychecks will be smaller; however, the amount of taxes taken from your paycheck will be greater, making it less likely you’ll owe when you file your taxes.

If your refund has changed due to recent tax law reforms:

It may be a good idea to talk to a financial coach who can help you make a spending plan and set some financial goals that take into account how recent changes may have affected you this tax season.

Many organizations across the country provide financial coaching free of charge. Call your  3-1-1 or 2-1-1 hotline if it exists in your area, or contact your local United Way or other trusted community organization to see if they can refer you to a financial coach. Your city government may even provide coaching through a Financial Empowerment Center.

In New York City? You can schedule an appointment with one of the Clinic’s expert financial coaches.

Are you a financial coach or nonprofit practitioner? Check out our Tax Time Mini-Toolkit to access tax-related coaching tools for your customers.

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Be sure to check out other helpful blog posts from both the Get It Back Campaign and The Financial Clinic.

We hope this helps you get started planning for tax time! Be sure to check out Parts I and II of the series:

Part I: What Tax Reform Changes Should I Know About?
Part II: How Can I Make the Most of My Tax Refund?

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This blog series is co-authored by The Get It Back Campaign and The Financial Clinic. Be sure to check out other helpful blog posts from The Get It Back Campaign and the Financial Clinic.

The Get It Back Campaign helps eligible workers claim tax credits and use free tax filing assistance to maximize tax time.

The Financial Clinic builds working poor people’s financial security through direct services, partnerships that embed financial security practices into nonprofits nationwide, and policy campaigns in support of working families.

Tax Time Kickoff Series: Part II- How Can I Make the Most of My Tax Refund?

As we kick off tax season, the Center on Budget and Policy Priorities’ Get It Back Campaign and the Financial Clinic have teamed up to help you sort through what tax reform might mean for your tax refund, and what you can do to make the most out of tax time. This is part two of a three-part series.

 

Now that you have an idea of tax law changes that may influence your tax return it is time to think about how you can maximize your refund. Before you receive your refund or even file your taxes, you can make a plan for the additional income. Having a plan can keep you on track so that your tax refund helps get you closer to your financial goals. Additionally, by planning ahead, you can bring the right materials to your tax appointment and ask questions to help ensure everything goes smoothly.

Here are some suggestions to help you maximize your refund:

  • Plan to split your tax refund
    • Bring your checking AND savings routing and account numbers to your tax preparer (we recommend checking out a VITA site!). Tell your preparer you want to split your refund using Form 8888. This allows you to save a portion, and keep a portion for spending in your checking account. Decide what percentage of your refund you want to save ahead of time. In 2018, 1 in 5 VITA site customers surveyed at the Financial Clinic planned to save 50 percent of their tax refund.
  • Pledge to save part of your refund
    • Through America Saves, you can get a text message reminder about your pledge to save. This can be one-time savings or monthly savings.
  • Save for future educational expenses
    • Using tax Form 8888, you can put part of your federal return into a college savings account by listing the routing and account number for the savings account on the form.
    • In Arkansas, California, Hawaii, Maryland, Missouri, Oregon, Pennsylvania, Utah, Virginia, and New York, you have the option to split your state refund and place part of it into a 529 account for your dependent’s future educational expenses.
    • In Colorado, Delaware, Ohio, and Illinois you also have options to deposit state refunds directly into a 529 account, but not the option to split your refund.
  • Purchase savings bonds
    • Your tax return is one of the easiest ways to get a U.S. Savings Bond, and bond rates are higher than they’ve ever been. Ask your tax preparer about putting a portion of your refund towards a savings bond. You’ll use the same federal form, Form 8888  purchase savings bonds.
  • Participate in a savings program
    • SaverLife is a free online program where you can earn prizes for saving. SaveYourRefund is another program where you can enter cash prize drawings when you save a portion of your refund. Ask if there are any local savings programs in your community.

Making the most out of your refund once you receive it.

You’ve made your plan, filed your taxes, saved a portion of your refund, and received your refund. Now what? The next step is deciding what to do with the remainder of your refund.

Here are some suggestions from the Financial Clinic’s  coaches and customers:

  • Pay bills
    • Many customers like to use their refunds to pay bills in advance– like car insurance and rent– to help reduce stress.
  • Pay off debt
    • Using your refund to pay off your debt can make it easier to save throughout the year.
  • Treat Yourself!
    • Allow space to treat yourself to something small with your refund. This will make it less likely that you will be tempted to dip into what you plan to keep saved.

We hope this helps you get started planning for tax time! Be sure to check out our first blog in this series, and check back later in the week for “Part III: How Can I Plan for Changes to My Refund?”.

Do you provide financial coaching to others? Check out our Tax Time Mini-Toolkit to help you have tax planning conversations with the customers you serve

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Be sure to check out other helpful blog posts from both the Get It Back Campaign and the Financial Clinic.

Part I: What Tax Reform Changes Should I Know About?
Part III: How Can I Plan for Changes to My Refund?

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This blog series is co-authored by The Get It Back Campaign and The Financial Clinic. Be sure to check out other helpful blog posts from The Get It Back Campaign and the Financial Clinic.

The Get It Back Campaign helps eligible workers claim tax credits and use free tax filing assistance to maximize tax time.

The Financial Clinic builds working poor people’s financial security through direct services, partnerships that embed financial security practices into nonprofits nationwide, and policy campaigns in support of working families.

Tax Time Kickoff Series: Part I- What Tax Reform Changes Should I Know About

As we kick off tax season, the Center on Budget and Policy Priorities’ Get It Back Campaign and the Financial Clinic have teamed up to help you sort through what tax reform might mean for your tax refund, and what you can do to make the most out of tax time. This is part one of a three-part series.

This year, tax time brings several changes that could impact your federal tax refund and change how you file your taxes. The Tax Cuts and Jobs Act (TCJA) of 2017 includes some changes that could leave you with a tax refund different from what you were expecting. Here are six tax law changes you should know:

  1. New tax rates
    •  The amount of tax you pay is based on your income bracket. When you file your taxes this year, your tax bracket may be slightly lower or higher, depending on your annual income.
    • Two other factors that influence the amount of taxes you owe include other tax credits you are eligible for and the amount of taxes you paid in advance throughout the year.
  2. Eliminated exemptions
    • In the past, you could claim personal exemptions for yourself and your tax dependents. These exemptions reduced your taxable income, lowering the amount of taxes you pay. Now, you can no longer claim these exemptions. If your family has one or two dependents, the new standard deduction provides a similar benefit (see #3). If you have more dependents, the elimination of personal exemptions means that more of your income may be taxable.
  3. Increased standard deduction
    • The standard deduction, like other tax deductions, reduces your taxable income, which lowers the amount of taxes you pay. The new standard deduction has nearly doubled, helping to offset the elimination of exemptions.
    • Here’s how the new standard deduction compares to last year:
    • [table id=2 /]
  4. Child Tax Credit changes
    • The Child Tax Credit helps offset the cost of raising children by giving you money back at tax time. There are three significant changes to the Child Tax Credit (CTC):
      • Amount – The CTC is now worth up to $2,000 for each qualifying child under age 17. Previously the credit was worth up to $1,000 per child.
      • Minimum income – If you earned more than $2,500 in 2018, you may be eligible for the refundable part of this credit worth up to $1,400 (also known as the Additional Child Tax Credit). This means that even if you don’t owe taxes, you will still receive the refundable portion as a tax refund.
      • Taxpayer identification requirement – Children you claim for the CTC must have a valid social security number (SSN) that authorizes work. As the tax filer, you and your spouse (if present), can have an Individual Taxpayer Identification Number (ITIN) or an SSN.
  5. New Credit for Other Dependents (“Family Tax Credit”)
    • As part of the changes to the CTC, there is a new $500 non-refundable tax credit available that you can use to claim dependents. This includes children 17 and older, children with ITINs, and other relatives (for example, dependent parents). Since this credit is non-refundable, it only helps reduce the taxes you owe and doesn’t provide a refund.
  6.  Itemized Deduction Changes
    • If you filed Schedule A in the past, there are several changes to itemized deductions. Three that you should know about include:
      • State and local taxes – The amount you can deduct for state and local income taxes, real estate taxes, and personal property taxes is limited to a combined total of $10,000 ($5,000 if married filing separately).
      • Home mortgage interest – Interest on home equity loans is no longer deductible. This is one of several changes to this deduction.
      • Medical expenses – Medical and dental expenses are deductible if they are more than 7.5 percent of your adjusted gross income (AGI), which is the same as last year. This will increase to 10 percent of your AGI in 2020.

What else do you need to know?

  • These tax law changes are temporary. These changes are effective when you file your taxes this year for the 2018 tax year, and expire after 2025, unless otherwise noted. In 2026, these tax laws changes are set to revert to previous levels.
  • Professional free tax help is available. There are other changes under tax reform that may affect you. Since there are several factors that can influence the amount of taxes you owe and the size of your refund, it is important to get tax help from a qualified tax preparer. The Volunteer Income Tax Assistance (VITA) program has a network of experienced tax professionals who provide tax preparation for free. Volunteers receive specialized training and must pass a certification exam annually. (There isn’t a similar requirement for paid tax preparers.) Learn how to find a free tax site near you or call your local United Way 2-1-1 service line.
  • There are new tax forms. This year, there is one Form 1040 to file (two half-sheets) with other forms available. This form replaces Forms 1040A and 1040EZ. Additional forms that you need to file depend on your personal tax situation.
  • Refund delays continue. The Protecting Americans Against Tax Hikes (PATH) Act of 2015 requires tax refunds that include the Earned Income Tax Credit or Additional Child Tax Credit to be held until February 15 so the IRS can check your income against what your employer reported. The IRS strives to issue refunds within 21 days of processing, however, additional delays are possible following the partial government shutdown. If you’ve submitted an ITIN renewal with your tax return, expect further delays since your ITIN application must be processed before your tax return.

We hope this helps you get started planning for tax season! Be sure to check back next week for Parts II and III of the blog series:

Part II: How Can I Make the Most of My Tax Refund?
Part III: How Can I Plan for Changes to My Refund?

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This blog series is co-authored by The Get It Back Campaign and The Financial Clinic. Be sure to check out other helpful blog posts from The Get It Back Campaign and the Financial Clinic.

The Get It Back Campaign helps eligible workers claim tax credits and use free tax filing assistance to maximize tax time.

The Financial Clinic builds working poor people’s financial security through direct services, partnerships that embed financial security practices into nonprofits nationwide, and policy campaigns in support of working families.

Say NO to New Year’s Resolutions and YES to Financial Solutions!

Bridget Tate | Manager of Service Delivery | The Financial Clinic

Now that the ball has dropped and we have rung in the New Year, it’s time to get excited for a clean slate and 365 days to make this the best year ever. Many of us have started our annual list of things we will change this calendar year: joining the gym, saving money, traveling more. You made your resolutions and promised yourself and everyone around you that you would follow through this year. Now that January is upon us, your momentum is strong, and your willingness to reach your goals is at the forefront of your mind, you hope that this year will be different. What if, instead of hoping that the changes will stick, I could guarantee to you that they will? How? Easy. By showing you how to plan out some solutions instead of setting resolutions.

Resolutions are firm decisions to do or not do something. When making a resolution for the New Year, we often find ourselves vowing to start behaviors that will have a positive impact on our lives or to leave behind behaviors that are no longer serving us. And while it is always a good idea to take steps towards self-improvement, the decision in and of itself is not an actionable step; hence, 80% of New Year resolutions not being reached. In contrast, a solution is a means of solving a problem or dealing with a difficult situation. A resolution with no solution is just a decision without a plan.

Before you do anything else, you need to identify what you are striving towards. If you need help setting the right financial goal, remember that goals are reached by understanding your values and identifying what is passionately important to you. Worksheets, like Identify Values Wheel, and other tracking methods will lend you, the additional support you may need. 

Set yourself up for success by identifying barriers that have kept you from reaching your goals in the past and be open to new solutions for overcoming those barriers. Changing behaviors and attitudes toward your financial goals will result in actionable goal wins that will lead to sustainable financial victories. What Barriers do you foresee impeding you reaching your financial goals? The table below lists common barriers and solutions. Copy and fill in the table below with your own barriers, then use the solutions provided to get you started on overcoming them.

[table id=1 /]

If one of your barriers is staying motivated, here are some additional solutions:

  • Use positive statements like I can or I will
  • Journal or video journal the highs and lows of your progress
  • Re-evaluate your goals regularly
  • Schedule weekly or biweekly self-reflection time 
  • Celebrate and give yourself pats on the back when you observe behavioral changes
  • Break long-term goals up into short-term goals: 30 days, 60 days

Once you have compiled your list of past barriers, map out a plan that addresses the challenges and pitfalls to achieving your financial goals. Your best lessons learned are always prior attempts that resulted in an incompletion. Think of those past attempts as a trial run on your method. Even in these “failed” efforts, you can find successes and learn valuable lessons that you can bring to the table this time.

Now you have a goal, a solid plan, and tools to get you started you can begin to work towards making 2019 your most financially secure year yet! Have fun, get creative, and most importantly, give yourself a high five for starting 2019 with a solution.

Learning from 2018 and Looking Forward to 2019

Quinton Cannon | Financial Coach | The Financial Clinic

As 2018 comes to an end, we all have an opportunity to look back and reflect on the year gone by and use insights we gain from that process to inform our decision making in the year to come. This process is especially important when it comes to your finances. The end of the year provides a great opportunity to plan out the coming year and make sure our spending behavior aligns with our financial aspirations.

Goal Setting

As a financial coach, I often talk with people about making and tracking financial goals, such as paying for education, saving for retirement, or building an emergency fund. As I have accompanied people on their journey toward achieving their financial dreams, I have become convinced that the best goals are those that are specific and quantifiable. People are just generally more motivated when they are working toward a specific target and can measure their progress toward it.

Budgeting to Achieve Goals

Setting a specific goal is a critical first step, but what follows is equally important. Once you know what you are working toward, you should budget and make a plan as to how you are going to achieve it. With a realistic budget in place, you can plan out how much you will be able to set aside each month and thus project how long it will take you to reach her goal.

Unfortunately, it is easy to get trapped in thinking about budgeting on a month to month basis and allowing long term financial goals to get lost in the mix while trying to meet your current obligations (particularly during expensive times like the holiday season). When money gets tight, savings and longer term goals are often the first things that falls to the wayside.

So, as you’re reflecting on the financial goals you made in 2018, you might find that you haven’t made the progress you thought you had toward building up that emergency fund or college savings, even though you were doing our best to follow a monthly budget.

The Importance of a Yearly Budget

If you haven’t made progress towards your long-term goals you may be asking, what happened and what can you do to get back on track? The answer lies in reviewing the past year, and creating a realistic yearly budget for the new year.

This isn’t always a quick process. While it might be relatively easy to figure out what you spent on fixed expenses (e.g. rent), it is considerably more challenging to estimate your variable expenses for the year (e.g. clothes shopping). So, in order to get a good sense of what your spending truly looked like for the year, you’ll likely have to do some digging.

If you’ve kept good records of your monthly spending throughout the year, you can simply add up the spending data you have compiled to see how much you spent overall and in a number of categories (e.g. restaurants). If you got busy with other things during the year and haven’t been able to keep consistent records, you’ll have to put in a little more effort. There are several ways you can go about getting your hands on your spending data; bank statements and/or automated budgeting apps (like Clarity Money, NerdWallet, or Empower) are probably the two most readily accessible options.

How you compile and break down your yearly expenditures is, of course, totally up to you. As a general rule of thumb, I would say that the more detailed and precise, the better. Good financial decision making and goal setting is greatly facilitated by having solid information to draw on. Having said that, you certainly don’t need to be a spreadsheet master or have everything perfectly accounted for. Having even a general sense of your fixed and variable expenses for 2018 can go a long way toward helping you in 2019.

This is because seeing aggregate data can really put things into perspective by helping you understand the effect of seemingly mundane decisions. For example, $6 for a quick meal on your lunch break might not seem like too big of a deal. But if you were to spend that much on lunch consistently, it could add up to be around $1,680 over the course of a year (assuming you took a few weeks off either from work or eating out). Small amounts can add up; thankfully, this is just as true for savings as it is for expenses. If you were to shave off $2 from your daily lunch bill in the above example, you could save $700 throughout the course of the year and be well on your way to building up a good chunk of savings.

Yearly spending data can also help you identify trends that might not be immediately apparent if you are just budgeting month to month. Perhaps you have a time of the year that is particularly expensive for you while another tends to be relatively cheap. Budgeting isn’t just about identifying things to cut back on; it’s also about understanding these trends so you can save extra money during low cost times and have a cushion to get through pricey months. The more accurately you can track and predict such times, the less fluctuations will affect your planned progress toward your goals.

Looking to the Future

Be sure to set aside some time in coming weeks to review your spending for the year and draft a budget for the coming year. If you are feeling like you could use a little extra help with this process, try meeting with a free financial coach. They can help you get organized and ready to take on the new year. You can make an appointment here. As you take stock of your year, you will gain several important insights into your spending that you can use to improve your financial decision making during the coming year and, as a result, come closer to achieving your financial aspirations.

Tipsheets

  1. Monthly Income and Expenses
  2. Daily Expenses
  3. Managing Your Finances Online: Worth It?