William Schmidt: The Variety of Work in Low Income Taxpayer Clinics
By William Schmidt, Low Income Taxpayer Clinic Director, Kansas Legal Services
Some taxpayers who believe they are employees working for an employer may be shocked when a Form 1099-MISC appears, showing that the business has treated the individual as an independent contractor for tax purposes. This requires that the individual pay the associated employment taxes. That individual may want to file Form SS-8 for the IRS to make a determination of worker status for purposes of federal employment taxes and income tax withholding. LITCs can provide assistance in preparing the form.
Clinics that are able to work with non-citizens may assist with ITIN filing or helping non-citizens take care of tax issues as part of the immigration process. ITIN filing also requires the gathering of documents.
Various notices such as a Notice of Deficiency or Notice of Determination have a deadline for filing a petition with the U. S. Tax Court. The Tax Court is based in Washington, D.C. and sends judges to select cities throughout the year. While several of the kinds of cases discussed above deal with a client’s IRS issues on an administrative level, Tax Court cases involve court procedure and litigation for an entirely different type of case. LITCs can provide full representation. This year the Tax Court allows limited entries of appearance during scheduled trial sessions.
Case work is not the only area that needs focus from LITC employees. We rely on grants from the IRS and other sources to fund our activities. The IRS grant requires that we provide outreach and education to the public regarding tax topics. That may require public speaking or writing articles. For example, in addition to this article for the Tax Times, I regularly write for the Procedurally Taxing blog on designated orders from the Tax Court. I also record and produce my own podcast about the LITC called Tax Justice Warriors. We are also required to provide grant reports at different times during the year.
Working in an LITC means being versatile because of the variety of cases. It requires tax knowledge but directing an LITC also takes administrative skills to function and be effective under the IRS grant.
What Differences Are There Between Legal Aid and Law School LITCs?
One of the largest differences between these organizations is the source of their funding. For legal aid, a major funding source other than the IRS grant is funding from the Legal Services Corporation, which has significant restrictions on use of its funding. Some examples that affect the LITC world are restrictions on aid for non-citizens and prisoners. These restrictions are detailed in a handy chart on the Legal Services Corporation website. LITCs at law schools often receive significant funding from the law school or university itself. LITCs that do not fit in those categories may be independent of these funding sources. Each funding source may or may not have restrictions that require navigating. It is always helpful when you can refer a taxpayer in a restricted subject area to another LITC that does not have those restrictions.
Another major difference is the kind of workers available for the LITC. In a legal aid environment there might not be many people who know anything about tax law. In fact, the LITC director might be a staff attorney recruited from another area to fill the slot of tax attorney. That person might not receive much training and may learn on the job what they can to represent clients with tax problems. Other attorneys are required to split their time between tax and other areas of law since there may not be sufficient funding to focus fulltime on tax.
At a law school, there are professors and students involved in the clinic. Professors have the tax knowledge and manage the cases (though some of them may also learn in trial-by-fire situations if it is not an area of their expertise). Students work the cases under the supervision of the professors in their own form of on- the-job training. Clinical work at a law school may mean that the client has to get acquainted with a new student intern each semester. The student’s tour of duty for the semester also leads to logistics difficulties to insure the student has a power of attorney allowing communications with the IRS before the semester’s end.
Of course, a main difference between law school LITCs and LITCs that are not at law schools is that the law school LITC employees and directors are often doing double duty. They not only try to manage the cases, but they also manage the students with the goal of teaching them at the same time. LITC professors might also teach a class at the law school on tax controversy work or some other tax topic.
How Does It Work When a Single LITC Covers an Entire State?
This is an area that does not affect every LITC, but one I think about fairly often. The Kansas Legal Services LITC is the only LITC for the state. In fact, there are only 16 LITCs in the country that serve their entire states.
So the question arises—how can I provide service for everyone in Kansas from the eastern edge of the state? To be honest, I can’t. My client intakes are only a fraction of the tax issues for low-income people within my state. My clinic is relatively new (started in 2015) and I keep trying to get the word out in Kansas that assistance for tax problems is available. I try to build my clientele because I feel a responsibility as the sole LITC providing coverage.
It is also easier for me to focus on the eastern half of the state, which has the larger cities. I think it is difficult to get the word out to the western half, which is more rural and has a larger farming population.
Something that helps is the nature of tax controversy work. For work with the IRS, there may not have to be a public appearance. Often dealing with the IRS may be by phone, fax, or mail. With clients, long distance communication still often works out just as well. It is not perfect since there are some clients who would like the personal touch of an in-person meeting, but we have to work with what we can
I have tried to make friends with the LITCs in neighboring states. It helps that we are a friendly group, so it is easy to contact another LITC for advice or networking. For example, I have two LITC neighbors in the Kansas City area on the Missouri side: Legal Aid of Western Missouri and the University of Missouri-Kansas City School of Law. It is comforting to know they are available for conference calls, collaboration, or client referrals when there is a conflict of interest.
We will explore different issues in taxes for low income persons over the next weeks. Next week we will discuss more about Low Income Taxpayer Clinics in general.
Until then, please review our webpage on information about the KLS Low Income Taxpayer Clinic.
Note: This article first appeared in the ABA Tax Times Newsletter, August, 2019.