TAX NEWS - 2010

Earned Income Tax Credits helped Plano resident climb back

When housing slump pulled remodeling business down, Earned Income Tax Credits helped Plano resident climb back

Richard Arnold is a bit sheepish about getting help from the Earned Income Tax Credit program.

"All of a sudden, I'm taking tax credits from a broken government," said Arnold, 58, who has run his own construction remodeling business for 38 years. "The buck's got to stop somewhere, I guess."

The Earned Income Tax Credit can refund several thousand dollars to taxpayers who earn less than $40,000 and have children, though it also helps low-income earners with no kids.

The credit cost federal tax coffers about $49 billion in revenue in 2008, according to government records. For some, it's considered too generous a tax break at a time when federal deficits are swelling because it contributes to nearly half of all returns owing no taxes after withholding.

For Arnold and thousands of other taxpayers, it's allowed them to get back on their financial feet.

Like many in his line of work, Arnold says times have been lean with the housing slowdown. It had beaten down his income well below his best years – and even then, it had topped out around $38,000 a year.

"People have the want to improve their homes; what they're lacking is the money," said Arnold, a Plano resident.

Arnold left Mustang Contracting two years ago over some disagreements. But, with the recession, the timing for going solo was far from ideal.

Then, over the past three years, his own tax liability suddenly ballooned to more than $10,000 – a "splinter in his side," he said. He'd fallen behind on quarterly payments to the IRS to the point where even a payment plan through a "hardship" filing was going to be too difficult to manage.

When his longtime accountant died, Arnold and his wife, Silvia, turned to the Catholic Diocese for help. The diocese sent them to the United Way, where a program of free tax help turned around their finances, even though his tax file was "4 inches thick."

The United Way-sponsored accountant spied a discrepancy: a repeated income listing that, after some long consultation with his former business partner, turned out to be an accounting mistake.

His income was actually $14,000 lower for one year; refiling several years of his returns for himself and his business netted $9,569 in refunds through the EITC.

With penalties on what he owed before, his debt to the government was not totally wiped out, but he was left with "something that's going to be a lot more manageable."

Plus, the good news he got from his former business partner's accounting staff has brought the construction partnership back together.

"He told me I was leaving for all the wrong reasons – and he said he knew I'd be back," Arnold said. The reunion has paid off with a few more leads for Arnold for bathroom and kitchen remodels, his bread and butter.