If you don’t have a bank account, it is going to be hard to obtain a tax refund. This is because electronic banking and income tax filing are becoming so popular. The Treasury Department thinks tax refund debit cards could possibly be the solution. An income tax return electronically transferred isn’t helpful for any person without a bank account, which is also called “unbanked” or “underbanked”. Tax refund checks can take weeks to arrive. The unbanked will do something to get their cash faster. Typically this means getting “refund anticipation loans”. These checks also cost taxpayers enormous amounts just to print and mail them.
Possible tax refund debit cards
The biggest advantage offered by tax refund debit cards is speed. Income tax refund checks take six weeks to come within the mail when even a direct deposit can take eight to fifteen days to show up within the financial institution, says the Associated Press. Borrowing against an income tax return can mean steep fees on refund anticipation loans for many without bank accounts. Several hundred thousand taxpayers could be capable to obtain a debit card with the pilot tax return program beginning next year. Without a check or financial institution, the tax return debit bank cards work like checking accounts. If the bank cards are lose or stolen, consumer protections stop purchases, and also the bank cards are insured just like bank deposits. Bill-paying services will be stored on the bank cards as well.
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 cards. The number was reached by working with the direct deposit refund from the 2010 tax season subtracted from the total tax refunds. That means 96.3 million minus 70.3 million was done. The Obama administration is hoping this will encourage more to get bank accounts, says Automated Trader. A $50 million request has been submitted to Congress for the 2011 spending budget to create “Bank on USA,” a program to help support state and local efforts to obtain more low-to-moderate income taxpayers into mainstream banking. An FDIC 2009 survey showed roughly 9 million households were without bank accounts.
Stopping return anticipation loans from happening
The tax refund debit card initiative is just part of a plan the Obama administration has began. The administration hopes to change some policies within 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. Banks use “debt indicators” to process refund anticipation loans, although now those won’t be provided by the IRS anymore starting within the 2011 income tax season. Now banks are having a harder time making the short term installment loans that end up with annual percentage fees between 50 and 500 percent to them.
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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
