Tax returns for individuals without bank accounts are becoming a problem within the era of electronic banking and tax filing. The solution, says the Treasury Department, are income tax refund debit bank cards. People without bank accounts, the so-called “unbanked” or “underbanked,” do not benefit from the electronic funds transfer of a income tax return to a bank account from the IRS. Tax refund checks can take weeks to arrive. Rather than waiting for that check to arrive, “refund anticipation loans” are usually taken out by the without a bank. Plus, the overhead of printing and mailing checks costs millions of taxpayer dollars.
Tax refund debit cards available
Tax refund debit cards will make the process faster. Tax return checks take six weeks to come within the mail when even a direct deposit can take eight to fifteen days to show up in the bank, says the Associated Press. Those without bank accounts may feel forced into borrowing. A return anticipation loan then comes with steep fees. Various hundred thousand will be capable to obtain a debit card with the pilot income tax refund program beginning next year. The tax refund debit cards will work like checking accounts — without the checks or the bank. Bank’s deposits are insured like the bank cards. Also, there can be consumer protections stopping all purchases if the cards are lost or stolen by anyone. Other income can be stored on these bank cards. That means bill-paying services will be available also.
Working class should get bank accounts
The Center for Economic Progress estimates up to 26 million working class people could benefit from income tax return debit bank 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. Automated Trader reports the Obama administration is exploring ways to encourage more people to acquire financial institution accounts. ”Bank on USA” is a program where low-to-moderate income working class are encouraged to get into banking and got a $50 million request sent to Congress for the 2011 spending budget. An FDIC 2009 survey showed roughly 9 million households were without bank accounts.
Stopping return anticipation loans from happening
The Obama administration is intending to help those in risky financial situations discover better way to work with finances with the income tax return debit card initiative. Last month there was already a policy change announced, says the Wall Street Journal. In the 2010 income tax season, “debt indicators” will no longer be passed out by the Internal Revenue Service. This means banks will not have anything to process refund anticipation loans with. Banks can have a more difficult time making short term installment loans. The loans typically would have between 50 percent and 500 percent to the annual percentage fees.
Associated Press
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Automated Trader
automatedtrader.net/real-time-dow-jones/14805/-us-treasury-to-offer-low_cost-bank-accounts-for-tax-returns
