Thread: Tax chains draw immigrants

http://www.kansascity.com/202/story/62276.html

LEGAL PARADOX | People defying one law see benefits in obeying another
Tax chains draw immigrants
People in the U.S. legally and illegally are seen as part of a lucrative market.
By DAVID TWIDDY
The Associated Press

“There’s going to be a spectacular opportunity in the next three to five years.”
John Hewitt, chief executive of Liberty Tax Service

Pedro Morales filed his first income tax return four years ago. It was a difficult decision for an illegal immigrant and one that caused plenty of headaches because the apartment manager who prepared his return made many mistakes.

“It doesn’t help when you have a bad experience, because it makes you want to give up,” said Morales, 37, through an interpreter, acknowledging that many of his neighbors in Johnson County who are illegal immigrants don’t file income tax returns.

But Morales has continued to file taxes with the help of more-informed preparers, hoping to build a tax history that will help his case when he eventually applies for permission to remain in the United States.

Morales isn’t alone. Many illegal immigrants are filing tax returns, either because of requirements showing a five-year record of tax payments when applying for a green card or a simple desire to get a refund.

“They want to be compliant,” said Maria Aranda, who teaches financial literacy classes for El Centro, a Kansas City-area organization. She helped Morales with his taxes.

It’s difficult to determine how many illegal immigrants are filing U.S. income tax returns, because the Internal Revenue Service doesn’t track tax filers by their immigration status. But tax preparation chains, such as H&R Block Inc. and Liberty Tax Service, say they have seen anecdotal growth and are working hard to attract more of them.

“It’s the fastest-growing segment of our population,” said John Hewitt, chief executive of Virginia Beach, Va.-based Liberty Tax Service. “There’s going to be a spectacular opportunity in the next three to five years with (immigration) amnesty and guest worker programs creating 10-15 million new taxpayers.”

One measure of the illegal immigrant market is the growth of Individual Taxpayer Identification Numbers, or ITINs, which the IRS issues to immigrants to use on their tax forms instead of Social Security numbers.

Last year, the IRS issued 1.5 million ITINs, the most since the program was started in 1996 and a 30 percent increase from the 1.2 million issued in 2005. In total, the agency has issued 10.8 million ITINs since the program began, although it noted that some of those are for people living overseas with some tax-filing responsibility.

H&R Block, the nation’s largest tax preparer, is going after the market in two ways.

First, it bulked up the number of retail offices with bilingual tax preparers, hoping immigrants would be more comfortable discussing their financial situation in their own language. They also translated their marketing into 15 languages, including Spanish, Chinese, Creole and the Filipino dialect of Tagalog.

The company last year rolled out its “spot franchise” program, which establishes H&R Block offices in metropolitan neighborhoods where immigrant groups have concentrated.

“It’s an opportunity for us to reach a client base that in general we have not been able to reach before,” said Doug Duty, an H&R Block assistant vice president.

Many of the offices are established mom-and-pop outfits that have decided to become H&R Block franchisees.

Waseem Hashlamoun’s company, Al-Muhaseb, or “The Accountant” in Arabic, has served his Middle Eastern-rich neighborhood on the north side of Chicago since 1995.

Hashlamoun became an H&R Block affiliate last year, a move he said allowed him to focus more on running the business than worrying about training his tax filers and to provide his customers with H&R Block’s full menu of financial services, including mortgage lending and investment advice.

Duty wouldn’t say how many spot franchises the company has, but he said the number has doubled in the past year.

Liberty Tax Service hasn’t created special offices for immigrants but has spent more time and money marketing to Hispanic customers.

In 2004, Hewitt said he hired a Hispanic consultant and began testing Hispanic-focused marketing in Raleigh, N.C. One office set a record with 1,500 tax returns in the first month.

“Raleigh isn’t a heavy Hispanic market, and we were very excited by that,” Hewitt said.

After that, Liberty began offering tax software online in Spanish, something H&R Block has yet to do, and it has watched Hispanic returns double every year, reaching 100,000, or about one-eighth of all returns, last year.

Parsippany, N.J.-based Jackson Hewitt Tax Service Inc., the nation’s second-largest tax chain, doesn’t have a corporate strategy aimed at immigrant customers, said spokeswoman Sheila Cort. “But we have a lot of franchisees who may be pursuing their own efforts in their communities,” she said.

The companies acknowledged that serving the immigrant community involves a great deal of education.

The tax-preparation firms also have to deal with the fears of illegal immigrants, who may think filing a return either changes their citizenship status or makes them more vulnerable to being seized by immigration agents. The IRS has said it doesn’t provide income tax information on individual filers to Immigration and Customs Enforcement.

“Dealing with tax policy is intimidating for me, and I’ve worked in tax preparation for years,” said Sheila Dougherty, a senior manager in H&R Block’s multicultural marketing division. “It’s especially intimidating for an immigrant who doesn’t understand the bureaucracy.”

Just remember, when they say they pay taxes that they are really saying we file a return for a refund. A refund they should not be receiving because they are working in the US illegally. Talk about a tax loophole. This is the information that needs to be shared with DHS.

Dixie