The Star-Ledger

New Laws Benefit Poor Taxpayers

The Star-Ledger — Wednesday, February 13, 2008

BY BETH FITZGERALD
Star-Ledger Staff

Gov. Jon Corzine signed legislation in Newark yesterday that expands state income-tax credits for the working poor and requires tax-preparation firms to fully disclose the fees they charge low-income taxpayers who opt for a "quick refund," or refund anticipation loan.

Corzine signed the bills at the Broad Street offices of New Jersey Citizen Action, a nonprofit consumer advocacy group that prepares tax returns at no charge for taxpayers with incomes below $40,000.

The legislation reflects lawmakers' concerns the working poor often aren't aware of how much it costs to get their tax returns prepared, and thus are parting with funds they can ill afford to lose.

Citizen Action has just launched a "quick tax refund" that competes directly with the refund anticipation loans from nationwide tax-preparation chains such as H&R Block and Jackson Hewitt.

Citizen Action works with banks that lend all or part of the refund to the taxpayer, for fees as low as $53, compared with fees of up to several hundred dollars at commercial tax-prep firms. The $53 fee is refunded to the taxpayer when the actual refunds are paid out by the IRS and the state, usually within two weeks. Taxpayers who don't want the loan can simply file their taxes for free, and get their refund in two weeks. "There are a lot of abusive operators in the tax-preparation market, and Citizen Action, through this volunteer income-tax assistance program that they provide here, and others do in other places, really are doing a great service for the public," Corzine said.

One bill expands the state tax-credit program by coupling eligibility to the more generous rules that govern the federal earned-income tax credit. Previously, $20,000 had been the upper income limit to qualify for a state earned-income tax credit. Now, the state follows the federal rules, which allow single people without children to qualify if they made less than $12,590 last year; at the upper end, married couples with two or more children qualify if they earned less than $39,783 in 2007.

New Jersey dispenses about $145 million annually in state earned-income tax credits, but that figure should be closer to $180 million, Corzine said.

"A lot of people are not aware that this is available," he said. "It is even more important at a period of time when it appears that we are heading into a recession. This is a tough time for individuals across the state if we don't utilize programs which are most effective in supporting our working families."

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