Leveraging the Tax Moment to Build Financial Capability June 9, - - PowerPoint PPT Presentation

Leveraging the Tax Moment to Build Financial Capability

June 9, 2016 2-3:30pm ET; 11am-12:30pm PT

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Welcome

Fran Rosebush Deputy Director, Field Engagement CFED

www.cfed.org

/CFEDNews @CFED cfed.org/blog/inclusiveeconomy

Our mission at CFED is to make it possible for millions of people to achieve financial security and contribute to an

• pportunity

economy.

Who We Are

www.cfed.org

/CFEDNews @CFED cfed.org/blog/inclusiveeconomy

How do we do it

We push to expand innovative practical solutions that empower low- and moderate-income people to build wealth. We drive policy change at all levels of government. We support the efforts of community leaders across the country to advance economic opportunity for all.

Taxpayer Opportunity Network Members…

• Participate in learning and

advocacy opportunities

• Learn about the latest

developments in the field

• Access valuable resources for

volunteers, program managers and site coordinators

• Get discounts to Taxpayer Opportunity Network

convenings

T

• join or learn more, go to: cfed.org/programs/taxpayer_opportunity_network

Leveraging the Tax Moment

Service Integration = Intentionally bringing services

together to capitalize on key moments and better help individuals achieve their goals

Financial Capability Services Other Program Services (e.g., workforce, housing, education, community health)

Many different types of services are being integrated into the tax moment

• Savings:
• Account opening
• Incentivized/Matched Savings
• myRA
• Credit:
• Counseling/ Report Screening
• Credit Repair/ Building
• Financial Access:
• ChexSystems Report Screening
• Prepaid Debit Card
• FAFSA Assistance
• Financial Coaching &

Counseling

• Financial Education
• Workshops
• Educational materials
• Benefits Access
• Federal & State Benefits Screening &

Enrollment

• ACA Navigation & Enrollment
• Assistance with Balances Due
• e.g. IRS

Withholding Calculator

Many different pieces of this work to consider at tax sites

Aligning

• rganizational

mindset and clarifying mission and goals Understanding taxpayer needs & selecting financial capability services Recruiting & training volunteers & staff Marketing & messaging at the tax site and throughout the year Designing client flow at the tax site Capturing data to evaluate services and demonstrate impact

Assessing internal and external resources to support this work

What’s in store for today?

• Welcome from our Co-Sponsors

§ JPMorgan Chase § EITC Funders Network

• Exploring Research: Large scale studies and findings

§ Center for Social Development § Consumer Financial Protection Bureau

• Sharing lessons from the field: Practitioner Perspectives

§ Center for Economic Progress § University of Missouri Extension § Boston Tax Help Coalition

• Connecting to additional resources and next steps

Welcome from Co-Sponsor: JPMorgan Chase

Colleen Briggs

Executive Director Office of Corporate Responsibility and Global Philanthropy JPMorgan Chase & Co.

Importance of Promoting Financial Health

OUR COMMITMENT Across the U.S. and around the world, too many people lack the tools and resources to manage their daily financial lives, weather unexpected emergencies, or plan for the future. They face daunting financial challenges, including:

Difficulty saving for emergency and long-term financial needs and managing unexpected risks Low credit score or limited credit history, impeding asset building Lack of access to products and services designed to address their needs

n Instead, they rely on costly non-bank financial services, such as payday loans or check cashing outlets,

resulting in billions spent in fees and interest each year. These services are riskier and often more expensive.

n The impact goes beyond households. Financial health is a key element of inclusive economic

• pportunity and growth. Research shows that financial inclusion helps individuals start and expand

businesses, invest in education, better manage risks and weather unexpected emergencies. It also boosts productive investment and consumption, helps reduce poverty and inequality, and catalyzes inclusive economic growth.

Significant monthly volatility

Need for Financial Capability Strategies

OUR COMMITMENT Traditional approaches assume financial illiteracy is the root cause of financial insecurity.

Financial literacy efforts must evolve and combine timely information with innovative tools that turn knowledge into action. These approaches focus on providing information about predatory lending practices and the benefits of conventional banking. Time the delivery of products and services to key financial moments. Pair relevant, engaging information with products and services. Employ choice architecture. Incorporate human- centered design. Leverage technologies to increase reach and improve efficiencies.

New strategies must encourage financial capability, rather than financial literacy alone. These include:

Research shows that basic financial literacy education does not improve consumer decision-making

• r result in

long-term behavior change.1

Sherraden, Margaret S. 2010. “Financial capability: What Is It, And How Can It Be Created.” University of Missouri–St. Louis: Center for Social Development.

What big data say about moments to save: Tax refunds

Sources of volatility in aggregate per capita monthly income

Frequency and magnitude of impact of tax-related transactions compared to employment outcomes

Almost 80% of people receive a tax refund, and they are larger in magnitude than the shocks from employment transitions

Tax time as an opportunity to improve financial health

n Tax time allows us to meet consumers where they are and provide products and services relevant

to their financial lives. Not only do individuals receive a large lump sum of income, but they are also already thinking about their finances.

n In addition to increasing awareness and maximizing tax refunds, free tax preparation services offer

a great entry for savings products and financial coaching to improve their financial health beyond tax time.

n Many nonprofit partners are still forced to do more with fewer resources. There’s an opportunity to

understanding how to use technology and behavioral insights to increase reach, maximize impact and create efficiencies.

Welcome from Co-Sponsor: EITC Funders Network

Ami Nagle

Coordinator EITC Funders Network

Who We Are

Our Members

¤ Almost 300 members ¤ Community foundations,

family foundations, public charities, corporate philanthropy

What We Do

¤ Meetings ¤ Webinars ¤ eNewsletter ¤ Website ¤ Consultation

Goals

The goals of the EITC Funders Network include:

¨

Increase communication among funders about EITC-related projects across the country;

¨

Explore issues confronting the field;

¨

Discuss ways to sustain and scale-up EITC work; and

¨

Leverage funding for EITC-related projects

Thematic Pillars

¨

Outreach and Tax Preparation

¨

Policy

¨

Benefits Access

¨

Financial Empowerment

EITC Funders Network * www.eitcfunders.org

Available Resources:

¨ On financial coaching (with a

funders' lens):

¤ Asset Funders Network, Financial

Coaching: An Asset Building

• Strategy. Defines financial

coaching in relationship to financial counseling or education and elaborates on the relationship with building financial capability. Also provides examples of coaching programs – including those at VITA sites – and explores issues

• f measuring success and the

role of funders.

¨ On financial coaching (metrics

and evaluation):

¤ Asset Funders Network

Webinar: Financial Coaching – Strategies and Outcomes for

• Grantmakers. Webinar focusing
• n the financial capability scale,

a standardized set of metrics that organizations and funders can use to measure the impact financial coaching efforts.

¤ Urban Institute, An Evaluation of

the Impacts and Implementation Approaches of Financial Coaching Programs

EITC Funders Network * www.eitcfunders.org

Available Resources

¨ On the links between the EITC, VITA and FAFSA:

¤ CBPP’s Get it Back Webinar: Navigating FAFSA and the EITC: How to

Connect Families to Help. Training on ways to connect tax credit outreach with FAFSA assistance with an overview of the ways EITC, VITA and FAFSA are connected.

EITC Funders Network * www.eitcfunders.org

Today’s Speakers: Research Perspective

Janie Oliphant

Project Manager Center for Social Development Washington University in St. Louis

Dave Sieminski

Policy Analyst Office of Financial Empowerment Consumer Financial Protection Bureau

Today’s Speakers: Practitioner Perspectives

Shatomi Luster

Financial Education Specialist University of Missouri Extension

Mimi Turchinetz

Assistant Deputy Director Mayor’s Office of Financial Empowerment Boston Tax Help Coalition

Satori Bailey

Director of Asset Building Programs Center for Economic Progress

• VITA provider
• Financial capability provider
• Funder
• Researcher
• Beginner learning more about this work

Who’s on the webinar with us today? Check all that apply.

Poll

From the Field: Exploring Research

Refund to Savings:

x

Building financial security at tax time

Janie Oliphant

9 June 2016

All screenshots of TurboTax Freedom Edition are considered Intuit, Inc. proprietary

Tax time: A golden moment to save

But still, why tax time? Tax time is a major financial event

– 147 million individual returns filed – 79% of filers receive refund – $2,719 average refund

IRS Data Book. FY 2014, pages 3, 4, and 20. https://www.irs.gov/pub/irs-soi/14databk.pdf TY2013, Brookings calculation of IRS data: http://www.brookings.edu/research/interactives/eitc

Refund to Savings (R2S) Initiative

• Test behavioral economics techniques to

encourage LMI households to save at tax time

– Turbo Tax Freedom Edition as a platform to test innovations – Using a sample size of over a half million households

• Develop low-cost, low-touch, and scalable

interventions

2015 Participant Characteristics

• Age: 34
• Claiming EITC: 42%
• 67% Single; 23% Head; 9% Married
• Household Income: $15,055
• Federal Tax Refund: $2,030

Relative Value of a Refund from 2014 Experiment

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Federal Refund 1 mo Housing 1 mo Income Mean Dollar Amount

2.5 1.3 $

How did we encourage people to save?

Choice Architecture

Typical Check Out Line Choices

Healthy Check-out Line Choices

Choice Architecture

Control group Treatment groups

How would you like to get your federal refund?

Intuit, Inc. proprietary

Choice Architecture

Control group Treatment groups

How would you like to get your federal refund?

Intuit, Inc. proprietary

Three Prompts to Encourage Saving Emergencies Goal Retirement

Interactive goal

Intuit, Inc. proprietary

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% A: Control B: Be prepared C: Interactive goal D: Interactive retirement

Rate of Depositing Any to Savings Vehicle

** ** **

2015 IPO n = 646,116

$0 $50 $100 $150 $200 $250 $300 A: Control B: Be prepared C: Interactive goal D: Interactive retirement

Amount Deposited to Savings Vehicles

** ** **

2015 IPO n = 646,116

Sum of R2S Impact

21,012 more savers due to R2S interventions

10,000 20,000 30,000 40,000 50,000 60,000 70,000

Number of Savers

$35.6 million more deposited to savings vehicles

$0 $20 $40 $60 $80 $100 $120

$ Millions to Savings

R2S Added

Discussion & next steps

Discussion:

• We can increase saving at tax time for low-income households
• Low-cost, low-touch interventions work
• Choice partitioning and emergency messages were most powerful

Next steps:

• Household Financial Survey data
• Next tax season

Potential innovations for the field

• Moving beyond TurboTax Freedom Edition

– VITA sites – Free File Alliance

• Offering other financial services at tax time
• Finding other golden moments to help

people improve their financial security

Acknowledgements

Contact information

Janie Oliphant Project Manager Center for Social Development j.Oliphant@wustl.edu Refund to Savings web page

CFPB tax time saving initiative

Make the most of your tax refund

Leveraging Tax Time to Build Financial Capability

Corporation for Enterprise Development Taxpayer Opportunity Network

June 9, 2016

Disclaimer

This presentation is being made by a Consumer Financial Protection Bureau representative on behalf of the Bureau. It does not constitute legal interpretation, guidance or advice of the Consumer Financial Protection Bureau. Any opinions or views stated by the presenter are the presenter’s own and may not represent the Bureau’s views. This document was used in support of a live discussion. As such, it does not necessarily express the entirety of that discussion nor the relative emphasis of topics therein.

50

CFPB Mandate

Encourage wealth building and access to financial services during the preparation process to claim earned income tax credits and Federal benefits.

Source: Section 1013(d)(2)(F) of the Dodd-Frank Act 51

Short and medium term goals

• Offer consumers who have low-incomes and/or low-wealth

more information and saving options

• Develop a deeper understanding of consumer decision-

making and service provider capability

• Test the effectiveness of promising approaches in both the

nonprofit and commercial environment

• Quantify the consumer benefits of saving and share with the

field

• Learn how and where the CFPB can productively contribute

to increasing saving at tax time

52

Long-term goal

Make savings outreach and education to consumers at tax time universal across all service and product platforms.

53

5 4

Learn from the VITA Field

55

Learning from research and innovation

• Refund To Savings / CSD and

Intuit

• SaveYourRefund 2015 (D2D)
• SaveUSA (mdrc)

56

CFPB report: Promising practices

• Developed from CFPB’s

2012-2015 tax time saving pilots

• Purpose:
• To help VITA staff and

volunteers promote saving

• To increase number of

taxpayers who save

Promising practices

• 1. Communicate with consumers

about saving before they come to the tax site

• 2. Offer the saving option more than
• nce at the tax site
• 3. Make sure tax preparers know how to

help consumers save while filing

• 4. Dedicate staff or volunteers to

promoting saving

• 5. Use “anchoring” and prompts to

help consumers focus on a savings goal

57

Promising practices

6. Make sure all staff and volunteers commit to encouraging savings

• 7. Don’t overwhelm consumers with too

many different types of options

• 8. Provide incentives to encourage saving
• 9. Provide multiple options for saving

10.Make saving fun!

58

Support of community VITA 2016

• Large scale pilot project in 41

communities serving more than 300,000 consumers

• Enhanced training and materials using

promising practices

• Report to the field Summer 2016

59

Direct to consumers 2016

• Insert with saving specific

message stuffed by Bureau of Fiscal Services into approximately 11 million consumers receiving paper checks

60

Collaborate with tax prep industry 2016

• H&R Block savings research

collaboration Yr. 2

• Email (400K consumers)
• In person (2 dist. 50 stores)
• Gamefication (SaveYourRefund)
• Follow up survey of savers and non

savers from first year of study

• Report on results from year 1

Summer 2016

61

About myRA

Many people who live paycheck to paycheck do not feel like they have any extra money to start saving for

• retirement. But with the right mechanism available to

them, that may no longer be true. And many Americans can open a myRA to take advantage of the tax-time moment by depositing a portion of their refund into this new account, which can help them save for both the short term and the long term. CFPB Director Richard Cordray Financial Literacy Education Commission November 18, 2015

62

63

Promoting myRA

Source: myRA.gov

CFPB Tools and Resources for Consumers

• Ask CFPB:

http://www.consumerfinance.gov/askcfpb/

• Complaints:

http://www.consumerfinance.gov/complaint/

• Tell Your Story: http://help.consumerfinance.gov/app/tellyourstory
• Publications:

http://promotions.usa.gov/cfpbpubs.html

• CFPB Blog:

http://www.consumerfinance.gov/blog/

64

Visit our webpage:

consumerfinance.gov/empowerment

Contact us:

empowerment@consumerfinance.gov

65

Q & A

What questions do you have? Share them in the Questions box!

• Choosing the right type & number of services to offer
• Designing & managing additional services beyond tax prep
• Sufficient resources (e.g. additional staffing)
• Ability to offer additional training to staff & volunteers
• Buy-in from staff & volunteers
• Other: T

ell us in the comments.

What do you think are the top challenges to leveraging the tax moment at tax sites? Check all that apply.

Poll

From the Field: Practitioner Perspectives

From the Field: Center for Economic Progress

Satori Bailey

Director of Asset Building Programs Center for Economic Progress

Tell us a bit about yourself and your program?

• Started at Center for Economic Progress (CEP) in 2014
• Funding: Private Philanthropy
• Assistant Site Managers dedicated time to Tax Time

Financial Capability; Volunteer Savings Coaches

How are you trying to build financial capability?

• Save

Your Refund Savings Campaign

• Savings Bonds
• myRA Retirement Accounts
• Bank Partners on Site
• Community Financial Resources Prepaid Cards
• Financial Coaching Referrals

What are you learning about this work? What are you learning from your taxpayers?

• People want to (and they can!) save at tax time
• Make savings fun!

§ Save Y

• ur Refund

§ Giveaways § Presentations and team work

What research do you still think needs to be done in this space?

• Identifying optimal efficiencies and effectiveness
• Achieving full integration

What’s on the Horizon? One take-away for the audience?

From the Field: University of Missouri Extension

Shatomi Luster

Financial Education Specialist University of Missouri Extension

Tell us a bit about yourself and your program?

• 10+ years in financial education
• Funding: VITA Grant
• Volunteers: AmeriCorps

VISTA + NCCC

How are you trying to build financial capability?

• Meeting individuals and families where they are:

§ T eaching in community classroom setting environments § T raditional tax season outreach (i.e. surveys, prize link savings and etc.) § Partnerships with community agencies (i.e. ACA navigators, Libraries and etc.) and other government agencies (i.e. VISTA and NCCC § Contributing to University curriculum development § Integration of other products and services within the tax process

What are you learning about this work? What are you learning from your taxpayers?

• Start with the basics
• Keep it simple: The easier for the taxpayer, the better.

§ If during the tax season, process needs to be seamless for volunteers and clients

• Financial capability is personal: individuals and families need

trust before engaging in personal transactional conversations.

What research do you still think needs to be done in this space?

• Access: What can be incorporated within the tax process

that makes Financial Capability, extension, and benefits

• btainable?

What’s on the Horizon? One take-away for the audience?

From the Field: Boston Tax Help Coalition

Mimi Turchinetz, Esq.

Assistant Deputy Director Mayor’s Office of Financial Empowerment Boston Tax Help Coalition

Tell us a bit about yourself and your program?

• Boston EITC Coalition

§ Launched in 2001 – in conjunction w/ community partners, financial institutions, the Boston Federal Reserve Bank and the Greater Boston Chamber of Commerce with the former Mayor, now supported by Boston Mayor Martin J. Walsh § 2002 = 400 returns at 12 sites; 2016 – 13,000 returns at 30 sites

• Funded through both philanthropic dollars and the Economic

Development Industrial Corporation, a part of the City of Boston

How are you trying to build financial capability?

§ T ax time can be an “Ah ha!” moment for taxpayers § “Financial Checkup” (FCU): An Intake, screening and credit building tool = credit report, FICO score, one-year plan § 65 volunteer Financial Guides provided 3470 FCUs § 11 interns served as Guides with 4 paid Lead Guides § Savings Strategy added this past tax season as part of CFPB savings pilot, offered myRA accounts § Continue to expand direct deposit, open bank accounts, and encourage taxpayers to purchase US Savings Bonds

What are you learning about this work? What are you learning from your taxpayers?

• Data + interviews demonstrate increase in credit scores, decrease in

debt and a change in agency

• FCU makes taxpayers more confident about their capability to

understand and manage their money

• How to offer services?

§ Clear on client flow – FCU must be done after preliminary intake and before tax preparation § Credit reports and credit advising provided on site with recommendations made on paying down debt as well as providing taxpayers a one year plan § Transunion now allowing TP to keep their credit report

What research do you still think needs to be done in this space?

• Expand the efficacy of FCU
• More experimentation to develop enhanced saving and credit

building strategies at tax time; developing best practices

• Need to determine how many choices for the taxpayer

What’s on the Horizon? One take-away for the audience?

Q & A

What questions do you have? Share them in the Questions box!

Take-Aways

JOIN US FOR THE

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Join the Network!

• Participate in learning and

advocacy opportunities

• Learn about the latest

developments in the field

• Access valuable resources for

volunteers, program managers and site coordinators

• Get discounts to Taxpayer Opportunity Network

convenings

T

• join or learn more, go to: cfed.org/programs/taxpayer_opportunity_network

Thank you!