Tax offices Brace for Immigration Reform Impact

PR Log (Press Release) – Mar 15, 2007 – March 14, 2007

With the support of President Bush and Democrats in control, it appears that comprehensive immigration reform is finally coming to pass.  

'This is a rare time when the politics are right for both parties to act,' said Rep. Zoe Lofgren, the San Jose Democrat who chairs the House immigration subcommittee. 'The expectation is that Democrats, in power, will get something done, and we have to do that. And if most Republicans block this again, they will put themselves in political peril.'

This week, Sen. Ted Kennedy and Sen. John McCain will introduce a bill very similar to the one that garnered almost two-third’s support of the Senate last year. The bill will outline conditions for undocuments residents to gain legal status which include paying a fine and presenting multiple years of back tax returns.

With such favorable conditions and pundit predictions of passage, tax preparation offices are already feeling the effect.  There are an estimated twelve million undocumented immigrants in the United States.  Many of them are unaware that they can file taxes even if they do not have a social security number.  Instead, they can apply for an ITIN (Individual Tax Payers Identification Number).  ITINS are hot commodities for immigrants who can use them to build a credit history, buy a home, open a bank account or obtain an EIN to open a business.  The IRS changed the rules regarding applying for ITINS in 2003 and now filing a tax return is one of the few ways you can receive an ITIN.  This has resulted in some upheaval in the tax preparation industry and as many preparers were caught off guard by the unfamiliar application procedures and criterion.

There is a learning curve when preparing taxes and filing for ITINS.  For instance, clients with ITINS do not qualify for Earned Income Credit but they can receive Child Tax Credit.  Clients can claim dependents in Mexico or Canada only.  Supporting identification documents are required and must meet specific criterion or risk rejection.

Unfortunately many tax offices are still unable to serve immigrants as they lack the training and experience or they do not have bilingual staff.  Hispanics who are currently seeking services to prepare for the immigration reform bill are often turned away even by mainstream tax offices who are just not prepared to serve them.

Tax preparers are reporting a surge in the past week of Hispanic clients walking in to ask about tax preparation after hearing “chisme” (gossip) about immigration reform.  
Tax offices are  making plans for extended bilingual staffing and hours, scheduling additional training and  conducting educational  outreach.

Liberty Tax Service, which provides intensive training and books on Hispanic marketing and ITINS for their franchise owners, has seen a tremendous increase in Hispanic clients over the past two years.  Most tax companies are dormant during the months of April to December but Liberty franchise owners are discovering a steady source of income in the off season. The immigration reform debates will most certainly kick this up a notch for qualified tax offices who are educating Hispanics about the political happenings.

Regardless of the bill outcome, these next few months promise to be both lucrative and busy for tax offices prepared to handle the surge.