Service Learning and Tax: More Than VITA

Over the past 10 years, there has been increasing interest in the use of service learning activities to inject elements of active learning into accounting curricula. Many of these efforts have involved the use of the IRS Volunteer Income Tax Assistance (VITA) program in the initial tax course for accounting majors. Articles discussing such approaches have been published in The Tax Adviser (e.g., Long and Kocakulah, “VITA, the MTC and the Modern Accounting Curriculum,” Parts 1 and 2, pp. 474 and 692 (August and November 2007), and Bauman et al., “Academic-Based VITA Programs,” p. 531 (August 2008)) and in Issues in Accounting Education (Rama et al., “Service-Learning Outcomes: Guidelines for Educators and Researchers,” p. 657 (November 2000), and Still and Clayton, “Utilizing Service-Learning in Accounting Programs,” p. 469 (November 2004)).

The purpose of this column is to provide the reader with some additional thoughts for integrating service learning using tax issues as the content platform. After some overview of the service learning process, the column describes the projects used by the author and some additional thoughts for expanding the scope of tax-based service learning projects beyond VITA.

Service Learning in General

Service learning is a teaching approach that combines specific curricular learning objectives with community service. Students learn by doing—they build on content acquired through one or more traditional means (lecture, self-study, etc.) and then apply that knowledge in a controlled setting by providing a specific service to individuals or organizations. The participating students then reflect on the service in individual or group sessions and discuss what they have learned not only about the content area but also about the importance of service in their lives. This latter component of reflection provides the richness of this experience that separates it from other experiential learning pedagogies.

Service learning generally offers students the opportunity to learn at a much deeper level than through the classroom and personal study. Service learning activities are at least at the application level of Bloom’s Taxonomy of Educational Objectives (e.g., VITA) and in some projects could even be at the synthesis and evaluation levels (e.g., designing and implementing a chart of accounts for a nonprofit that enables it to file Form 990). In addition, service learning offers students the ability to reflect on personal motivations, to deepen their understanding of different socioeconomic and ethnic groups, and to promote an attitude of shared social responsibility. Students who participate in service learning projects also improve their interpersonal communication skills.

Service learning generally benefits the community (which receives either collectively or individually needed and valuable services) and the student service provider (who learns more not only about the content knowledge but also about self and society). However, service learning can potentially be harmful if it is not provided in a context in which there is community and individual demand for the service. The service providers must also be sensitive to the concerns of those being served, especially if the service (or the provider) could be viewed as paternalistic and condescending.

Service learning is labor intensive for participating faculty. Finding appropriate projects, designing grading criteria and rubrics, and evaluating personal journals and reflections are not teaching methods that accounting faculty normally employ. Because developing expertise in these areas takes time, making the commitment to pursue service learning must be seen as a significant undertaking for both the individual and the institution.

Many universities now encourage service learning and have resources available to assist faculty unfamiliar with this teaching method. For those seeking more information, there is an abundance of online sources. A Google search of “service learning” yielded over 80 million entries, while “tax service learning” generated over 23 million.

Overview of a VITA Program

The author has employed service learning for the past five years in the initial tax course for accounting majors (Tax I) at Creighton University. In Tax I, the service learning assignment involves participation in VITA. The Tax I course blends elements of a traditional class and the AICPA Model Tax Curriculum. Since only one tax course is required of accounting majors, many students take only Tax I. As a consequence, although the majority of the course is primarily focused on individual taxation topics, some elements of business taxation, tax planning, and research are included. The required VITA experience reinforces aspects of the individual tax program.

Tax I is offered only once in each academic year. It was moved to the spring semester of the junior year to more easily map to the timing of providing VITA services. As the tradition of providing this service has grown, it has become part of the Beta Alpha Psi chapter’s annual service component. Because Tax I is intended to be a junior year course, many students participate in VITA twice during their course of study—once as part of Tax I and again as part of Beta Alpha Psi. The second-year participants are paired with first-year participants to serve as mentors and to provide some continuity from year to year.

The university is located in a city with a very extensive VITA network coordinated by a coalition of agencies that seek to enhance the use of the earned income tax credit. This coalition provides the sites where VITA services are provided. One or more senior students volunteer to assist in coordinating VITA by scheduling student volunteers, working with the coalition, and collecting needed documentation of volunteer preparation (passage of the VITA online exams) and participation (attendance sheets).

Service Learning Beyond VITA

Nonprofit Accounting

The author has also included service learning projects in an advanced accounting course. In advanced accounting, the service learning assignment involves assisting local nonprofit organizations. The class contains a module on nonprofit accounting. To reinforce the differences between the for-profit and nonprofit financial accounting environments, students engage in a service learning activity that is designed to assist local nonprofit organizations with their accounting needs. These projects range from designing a nonprofit chart of accounts to using ratio analysis to assess efficiency and effectiveness.

In the past several years, some nonprofits have requested assistance with federal tax compliance, including preparing Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, and the annual Form 990, Return of Organization Exempt from Income Tax. Recent changes in the Form 990 and in IRS-mandated compliance requirements have been additional motivations for nonprofits to seek tax services as part of these service learning projects. Because smaller nonprofits may struggle with tax compliance, assisting with initial exemption applications and designing (and implementing) charts of accounts that facilitate both GAAP-based financial statements and Form 990 compliance are valuable services. (For more on recent changes to Form 990, see Green and Moskowitz, “Revised Form 990: The Evolution of Governance and the Nonprofit World,” on p. 507.)

Potential clients for these projects are generally identified by a local nonprofit assistance group that disseminates information about the project. Proposals for service are solicited, and follow-up communications with the professor narrow the scope and expectations. The vast majority of clients selected are relatively new nonprofits, with many in their startup phase. Because many of these organizations are managed by mission-driven founders and not professional managers, students quickly learn that providing (tax) services to such individuals is different from dealing with the audit or tax clients they may have encountered in internships or part-time jobs. As a result, students learn valuable lessons about the nonprofit environment, client contact, and project and time management as ancillary learning outcomes from the service they provide.

Other Possible Tax Applications

Because tax factors affect many business and personal decisions, the chance to provide service learning opportunities is not limited to VITA or nonprofit organization tax compliance. For example, new businesses have choice of entity, methods of accounting, expense versus capitalization, and other tax-related decisions to make at inception. Schools that have partnerships with business incubators could offer service learning in assisting these start-up companies with tax matters. Tax students could also educate their student peers in such courses through presentations and discussion seminars.

The growth of personal financial planning offers an opportunity to provide tax advice in a controlled setting. Tax students and personal financial planning students could partner in providing financial plans to selected individuals. As part of a coalition effort, such students could work with low-income clients as an extension of the VITA program.

Tax students could also work in peer-to- peer situations with on-campus organizations needing tax assistance. For example, local chapters of sororities and fraternities may have tax filing obligations, including (among others) Forms W-2, Employer’s Quarterly Federal Tax Return; 941, Employer’s Quarterly Federal Tax Return; 990; 990-T, Exempt Organization Business Income Tax Return; and the 1099 series. As an alternative to providing the service directly, tax students could train the treasurers of such organizations so they are more aware of their responsibilities and how to discharge them.

Tax service learning projects also could offer service learning opportunities to nontax students. For example, marketing students could assist tax students in developing marketing plans for increasing community participation and awareness, information systems students could help in developing database management tools to track service usage and demographics, and human resources or communication students could assist in developing better client counseling and interaction skills.

Practitioner Involvement

Practitioners can play an important role in service learning. Some practitioners may be interested in helping even though VITA clinics operate during the busiest time of the tax season. For example, members of the Tax Committee of the Nebraska Society of CPAs have assisted student VITA volunteers. And helping nonprofits can also provide interaction with practitioners. For the advanced accounting projects described above, the professor contacts CPA firms with which the nonprofit client has a professional relationship to make sure the outside CPA is aware of and integrated into the service project.

For projects that develop a chart of account, many times the organization is seeking audited financial statements, and cooperation with the auditor in these cases is essential. For Form 1023 and Form 990 projects, especially if no financial accounting work is to be done, assistance from the outside CPA is very important. Due to the nature of these engagements, many CPAs providing nonprofit organizations with professional services may already have discounted fee arrangements. Student volunteers can thus bridge the gap between what the nonprofit needs and what it can afford.

Conclusion

One of the overall learning goals for the author’s accounting department, which is separately accredited by the Association to Advance Collegiate Schools of Business, is that students “will possess an understanding of how their personal and professional activities can enrich and renew society.” The two service learning projects described above are direct measures of meeting this learning goal. However, service learning is more than providing the administrative benefit of direct measures to satisfy program learning goals. Service learning is a wonderful opportunity for students, faculty, institutions, and communities to benefit from matching bright, enthusiastic, and competently supervised students with community needs.

Helping students to learn by serving can also be personally gratifying for faculty members. Some of the most rewarding feedback the author has received from students has been in their summary reflections for service learning projects. Faculty members and departments that employ tax-based service learning projects in their curricular approaches should find that the rewards far outweigh the costs.

EditorNotes

Annette Nellen is a professor in the Department of Accounting and Finance at San Jose State University in San Jose, CA. She is a former member of the AICPA Tax Division’s Tax Executive Committee and a current member of the AICPA Tax Division’s Individual Income Tax Technical Resource Panel. Thomas Purcell is a professor of accounting in the College of Business Administration and a professor of law in the School of Law at Creighton University in Omaha, NE. He was chair of the Tax Executive Committee from October 2004 to October 2006. For more information about this column, contact Prof. Purcell at thomaspurcell@creighton.edu.