IRS announces tax refund debit cards for unbanked households
The IRS will start sending tax refunds to unbanked taxpayers on debit cards in 2011. Tax refund debit cards will cut the expense of mailing paper checks and allow unbanked taxpayers to get their money faster. The IRS will send a letter next week to taxpayers eligible for a pilot program testing the tax refund debit card program.
Debit card tax refund could help millions
Issuing debit cards for tax refunds is another step in the effort to eventually make the IRS a 100 percent digital agency. Filing tax returns electronically began in 1990. In 20 years the IRS has processed 892 million e-filed tax returns and expects to hit 1 billion in 2011. In 2010, 70 percent of taxpayers filed their tax returns electronically. About 63 percent had their tax refund deposited directly into their bank account electronically. According to the latest U.S. census, there are nearly 9 million unbanked households — 17 million adults who don’t have a savings or checking account.
Who is eligible for tax refund debit card?
A notice for the debit card tax refund pilot program will be sent out to 600,000 households next week by the Treasury Department. The tax refund debit cards will also be offered to more than 1.7 million workers in the U.S. who get their paycheck in the form of payroll cards. The Treasury Department will be offering different debit cards with different features and fees in an experiment to identify the best approaches when the pilot program is expanded. Debit cardholders won’t feel compelled to get a loan or be charged service fees if they withdraw fast cash from ATMs in the MoneyPass network. ATMs outside the MoneyPass network will charge regular service fees.
Paper checks don’t pencil out anymore
Last year the Treasury Department said $40 million was spent mailing about $45 million in tax refund checks. The fastest way to get a tax refund is with e-filing and direct deposit, which puts tax refunds in bank accounts in as little as 10 days. People who owe taxes can make payments to the IRS online as well.