How the Legal Aid Society Helps Low-Income Taxpayers

“The biggest anti-poverty government subsidy is not welfare or Aid for Families with Dependent Children,” said a recent speaker to the League of Women Voters of Oak Ridge. “It’s the Earned Income Tax Credit (EITC),” which is embedded in the federal income tax code and cannot be cut by Congress like other anti-poverty programs.

Under the law, the Internal Revenue Service provides an income-based refund to low-income Americans, offsetting the 7.65% of their wages used to pay Social Security and Medicare taxes.

That was one of the messages of Mary Michelle Gillum, director and co-founder of the Low Income Taxpayer Clinic, also known as the Tennessee Taxpayer Project, which is under the Legal Aid Society (LAS) of Middle Tennessee and the Cumberlands. LAS has eight offices that serves 48 Tennessee counties, one of which is in the Victory Centre, 575 Oak Ridge Turnpike. It is Tennessee’s largest nonprofit law firm.

On the website, she wrote about the Earned Income Tax Credit: “Parents making around minimum wage get the highest amount refunded – as much as $7,430 for a taxpayer with three or more qualifying children. For a family bringing in around $15,000 a year through a minimum-wage job, an influx of money like that can make a huge difference.”

The problem, she said, is that the IRS, which is in the business of collecting revenue, is reluctant to hand out government subsidies. So, it audits many Americans who claim an earned income tax credit. Based on its studies, she added, the IRS has stated it had “determined that 42% of the people that claimed the earned income tax credit are doing so wrongfully.”

Not so, said Gillum, a tax attorney who in conjunction with the University of Tennessee College of Law Legal Clinic and the Legal Aid Society founded the Tennessee Taxpayer Project in 2000. A resident of LaFollette, she is recognized by the IRS as an expert on systemic issues that affect low-income taxpayers, including federal income tax controversies, bankruptcy and the need for legal defenses against plaintiffs in debt collection cases.

The IRS, she explained to the League audience, bases the 42% figure on the people who are audited and do not respond to the IRS “because they panic and don’t know what to do. That’s where we step in and help about 90% of our clients who have been denied the earned income tax credit. We have determined that they qualify for the tax credit, but we must help them convince the IRS.”

By “we,” Gillum was including Paula Murphy Trujillo, an outreach community paralegal of the Tennessee Taxpayer Project, who also spoke about LAS to the League audience. Trujillo is a licensed attorney from Peru who in 1998 joined the LAS to help Spanish-speaking clients

Gillum said that Tennessee Taxpayer Project lawyers file appeals against the IRS for its use of audits to deny refunds to low-income taxpayers who qualify for the earned income tax credit. They appeal these cases to IRS appeals officers, and if they do not succeed with them, to the U.S. Tax Court, the U.S. District Court, the Court of Federal Claims or, if necessary, a bankruptcy court.

According to a handout, the Tennessee Taxpayer Project helps people who owe the IRS money or are getting letters from the IRS (some letters could be scams, so you should call the IRS if you are suspicious about a letter having a possibly fake IRS letterhead).

The LAS serves people living in the 48 counties with an income below 125% of the federal poverty level and with assets worth less than $10,000. For example, Trujillo said an individual who would qualify might have an annual income less than $18,825, or $1,569 per month. For a family of four, the income might be less than $39,000, or $3200 a month.

According to Trujillo, “The Legal Aid Society is a 501(c)3 private nonprofit law firm that provides education and representation in civil matters for low-income individuals, families, seniors and other individuals who cannot afford legal services. Our mission is to advance, defend and enforce the legal rights of low-income and vulnerable people to secure for them the basic necessities of life.”

She said that in the LAS service area, more than 440,000 individuals live beneath the federal poverty level.

“There is one LAS attorney for every 13,000 citizens who need legal services,” she added, noting that 7 in 10 “low-income households experience at least one civil legal problem per year” and that LAS is the only provider of free, civil legal assistance in the state.

Trujillo said that the LAS offices handle a variety of legal cases related to issues involving not only federal income taxes, but also families (orders of protection, divorces for victims of domestic violence), health insurance, income benefits (Families First, food stamps, unemployment compensation, Social Security), education for juveniles, elderly people and consumers involved in Chapter 7 bankruptcy cases.

Many consumers seeking financial independence, she said, need legal assistance with defending against debt collectors (who repossess their cars, for example), creditor harassment and predatory lending practices. LAS helps immigrants who are victims of domestic violence, sexual assault and sex trafficking to obtain a legal status.

“We do not handle criminal cases or child support, personal injury and class action cases,” she added.

The statewide Tennessee Taxpayer Project, which helps clients in 91 counties, does not assist with preparing tax returns. But, according to the handout given League meeting attendees, the tax clinic will answer tax questions, help with IRS audits, settle tax debts, stop or remove liens and levies, represent people in the U.S. Tax Court or other federal courts, get relief from joint federal income tax debts for innocent spouses, get back your part of the tax refund if you’re an injured spouse and file appeals.

If you have questions related to your tax return, you can call the Tennessee Taxpayer Project hotline toll-free at 866-481-3669 to receive free advice.

Gillum spoke about her work in “systemic advocacy” in which she helped win two cases against the IRS in 2009 and 2010 that benefited LAS clients. The 2009 case, called Vinatieri v. Commissioner, 133 T.C. 392, was litigated on behalf of a woman client in the U.S. Tax Court. The IRS was taken to court because its lawyers claimed it had a policy that allowed it to impose a tax on the woman even though she was an “economic hardship” case.

“We convinced the judge that there’s a law that says in Internal Revenue Code 6343A1D that if a person is in economic hardship, the IRS can’t levy a tax on that person’s income or property,” Gillum said. The IRS argued its policy made what it did legal, she said, adding, “The court said to the IRS, ‘No, your policy is not legal. It’s not consistent with the law.’ And so, the court struck down this policy and ruled that the IRS could not levy a tax on this lady.”

The 2010 case Gillum helped win was Marlow v. Commissioner, which involved an audited couple in Claiborne County; she was disabled, and he drove a coal delivery truck to supplement their Social Security income. The U.S. Tax Court, she said, ruled that the IRS cannot rely only on internal computer records (instead of legally signed paper documents, which in this case its agents couldn’t find) to verify the validity of a tax assessment contested by a taxpayer.

Since 2000, Gillum noted, the tax clinic has brought its clients well over $50 million in financial benefits such as settled debts, removed debts and released frozen refunds.

Published by The Oak Ridger June 3, 2024.


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