In 2005, the Internal Revenue Service audited three hundred Minnesota Somalis because of one fraudulent Somali tax preparer. At the time, an IRS spokesperson, Janet Oakes was quoted in a Star Tribune article, warning, “They need to be as careful in choosing a tax preparer as they would a doctor or a lawyer, because they’re entrusting them with their personal information.” Since then, several Twin Cities non-profits, both Somali- and American-led, have tried to repair and rebuild the relationship between the Somali community and government officials.
The refugees, who fled Somalia to their new homes in Minnesota and elsewhere in the United States, left a country without a government since 1991. Few came to Minnesota with a working knowledge of taxes or financial institutions. According to Islamic tradition in Somalia, Somalis are not allowed to charge or pay interest on a loan; thus, many Somalis finance major purchases like homes, cars and businesses by lending and borrowing money from friends, relatives and neighbors. In other words, their money rarely enters into a formal financial institution such as a bank.
This presents large problems come tax season. Detailed records of important financial information can be hard to obtain or simply non-existent. Many basic documents like birth or marriage certificates were left behind in Somalia by those fleeing the violence. Without official documents, encounters with government bureaucracy and the IRS can be extremely confusing and can drag on for several years. The already strained relationship between tax collector and taxpayer is made more difficult by lack of information available to the East African community.
Duane Pulford, a senior tax consultant with the IRS, lamented that the IRS “does not have enough material in Somali especially compared to other languages like Russian, Spanish, Vietnamese or Hmong.” The Minnesota Department of Revenue website only has information on the audit process in Somali while there is nothing to explain the purpose of taxes or how to file them. Pulford continued, “The only source of information many in the community have comes from someone advertising tax services in the local grocery store, which can be unreliable or predatory.”
Increased numbers of flyers or advertisements about free tax sites will not necessarily translate into increased numbers of clients, however. Fatuma Mohamed of EMERGE Workforce, which offers employment-related services, emphasized the importance of word-of-mouth in the East African community. Mohamed said, “We are an oral society and if I put flyers into everyone’s mailboxes, no one will read them.”
Abdirizak Mahboub further attributes the reliance on word-of-mouth to the high illiteracy rate in the community, especially among the elderly. “Even if materials were offered in Somali [language] about taxes and opening bank accounts, people still wouldn’t understand it because wouldn’t be able to read it.”
Information, whether oral or written, is essential to correctly preparing tax returns and preventing the type of fraud committed in 2005, and yet little is done to explain to recent refugees the long-lasting damage of incorrect tax forms. One example, offered by Mohamud Ali, a refugee services specialist at the Confederation of Somali Community in Minnesota, is the number of dependent children that can be claimed.
“We Somalis understand family and children differently,” Ali said. “We call any child that we take care of ‘our own’, but that might not be true for taxes. I tell every client to make sure they can prove they have provided financially for the child at least six months and that the child resides with them.”
If, during an audit, the IRS discovers an incorrect number of children claimed for the Earned Income Tax Credit (EITC), a major source of refund money for low-income taxpayers, the taxpayer’s right to the credit can be revoked for several years. A revocation can amount to thousands and thousands of tax dollars lost which would otherwise be available to pay rent or to start a savings account.
Ali Warsame, founder and executive director of the East African Economic Development Center in Minneapolis, warns that consequences can be even worse for many Somali filers; they can lose their chance at citizenship.
“Significant numbers of East African immigrant previously experienced tax fraud and as a result large number of taxpayers are paying taxes they do not owe,” Warsame said.
He added, “Worse, if you owe money to the IRS you cannot qualify for citizenship, which for some means they can never get their citizenship.”
In his opinion, the East African community “has been marginalized especially in IRS-related issues.” The EAEDC serves, on average, five to eight clients a day hoping to solve their problems with the IRS, such as back taxes and incorrect filing. Many of the clients are referred to the EAEDC by other local organizations like the Dorsey & Whitney law firm, United Way and 411.
Warsame said of the state of his clients, “Some of them have been filing their taxes for the last few years and not getting any response, or their refund has been withheld by the IRS. Others are depressed because late fees, interest and penalties are accruing by the hours, so they’re seeking immediate help.”
One client, Haredo Shire, found his way to the EAEDC after a referral by the Dorsey & Whitney lawyers at the Brian Coyle Community Center in the Cedar-Riverside neighborhood of Minneapolis. When Shire arrived at the Coyle Center, he was “in despair and about to give up.” Once at the EAEDC he discovered the new non-profit, due to funding and staff shortages, was overbooked for the month, something Warsame says is common.
“Unfortunately, due to funding constraints we do not have the means to solve many of the problems; nevertheless, we will do any thing we can as an organization to address our clients’ issues,” Warsame said.
Abdizirak Bihi, a well-known advocate in the Somali community, applauds Warsame’s efforts. Bihi said, “When the IRS comes back months after tax season to a Somali neighbor and says these forms were filled out incorrectly, many Somali residents cannot find their original tax preparers. So I send them to Ali [Warsame] and he can solve almost all of their problems.”
Pulford complimented the EAEDC’s commitment to accuracy, saying, “We know that all of the volunteers are IRS trained and certified and they are using our methods. They are filling out these forms correctly every time.”
The EAEDC is the only center of its kind in the state, an astonishing reality for the tens of thousands of East African immigrants and refugees in Minnesota. Mahboub said, “Our community lacks viable agencies that offer tax information year-round, and that’s why we send everyone to Ali [Warsame]. He is the only one who deals with tax education after tax season ends.” Several legal organizations have a presence at the Coyle Center, such as Civil Society and Legal Rights Center, but none of them offer advice on financial matters.
When asked about how to improve tax services and education for the Somali community, Coyle Center volunteer Abdiasis Warsame responded simply, “If this were a perfect world, I would have these resources available at least three to four days a week, all year.”
Warsame continued, “The East African community is very, very eager to know about taxes and financial issues, but we lack the resources. During tax season, the lines to get tax preparation are so long they go outside of the [Coyle] Center in two directions.”
Despite the current lack of funding and resources for organizations like the EAEDC, many in the East African non-profit community are optimistic about the financial futures of many of their neighbors.
Residents are wary of free services, explained Fatuma Mohamed. “They ask themselves, ‘Why is this free?’ but now they know that paying someone to do your taxes doesn’t mean they will be done correctly.”
Bihi agreed that there is an element of distrust on the part of the community that is slowly changing. “As more people find out about the EAEDC and begin to create community trust in tax preparation organizations, they will avoid the tax scams that still exist. Many learned in 2005 that when you don’t do your taxes right, the ones left with the bill is you and not the tax preparer,” he said. “That’s why the work done by the EAEDC and free tax sites is so important.”
Michael Arnst is an intern with the East African Economic Development Center, based in Minneapolis, for the summer of 2009. He is majoring in International Studies with a focus on African Studies at Johns Hopkins University, and is interested in all issues concerning social justice both here and abroad.