Students Help Residents Deal with Record Number of Issues at Cal Poly Low Income Tax Clinic

After having to sell their home to care for a sick relative, a former Central Coast couple recently visited the Cal Poly Low Income Tax Clinic seeking help with another devastating event: An unexpected $223,000 bill from the IRS.

While the liability was jolting for the couple, the scenario wasn’t unfamiliar to Lisa Sperow and her team of student advocates.

The LITC has assisted a variety of clients in crisis.

Lisa Sperow, executive director of the Cal Poly Low Income Taxpayer Clinic, works with student team leaders. At the Low Income Taxpayer Clinic, students represent low-income clients involved in tax controversies before the IRS and the U.S. Tax Court and help provide tax education to the community all free of charge. (Photo by Joe Johnston)

“When they come to us here, typically they’re in trouble,” said Sperow, executive director. “Things have not gone well, and now they owe a lot of money.”

While accounting students involved with the Volunteer Income Tax Assistance (VITA) program help members of the community file taxes, the LITC, founded in 2010, pairs students with members of the community involved in tax controversies with the IRS or U.S. Tax Court. The free clinic provides students with valuable experiential learning, helping real people with real problems. For the clients, the clinic provides hope in desperate times.

“Sometimes there are tears, there’s anger — not at us but at the way their life has gone,” Sperow said.

Because the LITC receives a grant from the IRS, it must compile regular reports. In the first six months of 2022, the clinic recently reported, it opened 59 cases and worked on a record 94 different issues, saving clients $357,000 in assessed liabilities.

That included the couple who had to sell their home.

The wife, a nurse, had an ill father in Oregon. As the couple dealt with the move and sick loved one, an accountant mistakenly neglected to include appreciation records for the home in their tax returns.

The clinic was able to remedy the errors and negotiated a settlement that removed the liability.

“That’s the best part of the job,” Sperow said. “When we’re able to get a great result and share it.”

Several LITC students recently went to the U.S. Tax Court in Fresno to assist clients. Pictured here are, left to right, Hunter Smith, Sara Smith, accounting professor David Chamberlain, Austin Rountree and Nathan Nguyen. (Courtesy Lisa Sperow)

Usually, she has the students inform the clients of good news so they can experience the joyful response.

“The feeling is indescribable when a client’s case is successful, and they are grateful for the work we’ve done,” said Tia Bentivegna, a team leader who recently began her studies at the University of San Francisco School of Law.

Like Bentivegna, team leader Nate Nguyen’s experience at the clinic helped solidify his decision to pursue law school.

“I’ve always been interested in advocacy and public interest work,” he said.

Accounting students perform the work at the clinic, with advisement from Sperow, an attorney who formerly worked with the Department of Justice. The clinic assists clients in San Luis Obispo County and northern Santa Barbara County, though they often advise residents from around Fresno and Bakersfield, where there is no low income tax clinic.

While audits are often associated with wealthy individuals with complicated portfolios, working class people are often scrutinized by the IRS, Sperow said.

“I think your chances of getting audited are a little better if you’re lower income because those are easier audits for the IRS to do,” Sperow said. “It can be very easy for the IRS to audit someone who doesn’t have as much going on versus a very complex issue.”

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The issues can be unintended, such as both members of a separated couple claiming children as dependents or an individual unaware that taking money from a retirement account can result in an early withdrawal tax.

“We have two kinds of clients,” Sperow said. “We have clients who don’t owe the money, and we have to prove they don’t owe it, and we have people who do owe the money and can’t pay it, and we have to help them with a settlement.”

Often those in trouble are already experiencing other hardships.

One woman, whose daycare business ended when she lost her rented home, was living in a van with her granddaughter when she discovered she had a $10,000 tax liability related to her former daycare. In another case, a man who had suffered multiple strokes had his social security levied over a home sale. His wife, who had recently died, had handled the couple’s finances.

The clinic reduced his liability completely and lowed the woman’s $10,000 debt to a single dollar.

The clinic is able to negotiate settlements through the IRS’s Fresh Start program, which was created in 2011 to help struggling taxpayers. If a settlement is not an option, sometimes the students will also assist clients in court, as they did recently at the U.S. Tax Court in Fresno.

“We can’t help them all the time,” Nguyen said. “But I think it’s more wins than losses.”