Income tax refund are, because of electronic banking and income tax filing, harder to give to those without financial institution accounts. There is a recommendation from the Treasury Department to give tax refund debit bank cards out to help this. Those without financial institution accounts, also called “unbanked” or “underbanked,” do not obtain any help when it comes to the IRS transferring funds electronically for tax refunds. Weeks are taken for tax refund checks to get to the right place. Rather than waiting for that check to arrive, “refund anticipation loans” are typically taken out by the unbanked. These checks also cost working class enormous amounts just to print and mail them.
Tax refund debit cards bring speedy returns
Tax refund debit cards will make the process faster. As outlined by the Associated Press, direct deposits take eight to fifteen days to obtain the cash into an account. Getting a return check can take even longer with a six week wait for many people. Borrowing against a tax return can mean steep fees on return anticipation loans for numerous without financial institution accounts. Next year there could be a different option. The pilot income tax refund debit program can be offered to numerous taxpayers. Your tax return debit bank cards work like checking accounts. The only difference is there are no checks or banks involved. Bank’s deposits are insured like the cards. Also, there could be consumer protections stopping all purchases if the bank cards are lost or stolen by anyone. Bill-paying services could be stored on the bank cards also.
Taxpayers should acquire bank accounts
The Center for Economic Progress estimates up to 26 million working class people could benefit from tax refund debit cards. That number was reached by subtracting direct deposit refunds from the 2010 tax season– 70.3 million — from total tax refunds of 96.3 million. The Obama administration is hoping this will encourage more to obtain bank accounts, says Automated Trader. Congress received a $50 million request to fund a program called “Bank on USA.” This is to help low-to-moderate income taxpayers work with states in getting into banking. In 2009, the FDIC did a survey on households with financial institution accounts. About 9 million households have them.
Return anticipation loans to die out
The income tax refund debit card initiative is just part of a plan the Obama administration has started. The administration hopes to change some policies in the government to make sure financial alternatives are offered to those in risky financial situations. Last month there was already a policy change announced, says the Wall Street Journal. beginning in the 2011 income tax season, the Internal Revenue Service will no longer provide tax return companies with “debt indicators” used by banks to process return anticipation loans. Now banks are having a harder time making the short term loans that end up with annual percentage fees between 50 and 500 percent to them.
Additional reading
Associated Press
google.com/hostednews/ap/article/ALeqM5gjOACVZgIYIFoYxqpOl-uISuMxiAD9HVPC6G3
Automated Trader
automatedtrader.net/real-time-dow-jones/14805/-us-treasury-to-offer-low_cost-bank-accounts-for-tax-returns
