Treasury Announces Low-Cost Financial Account Program for Taxpayers


In a move that may cut down on the use of refund anticipation loans (RALs), the Treasury Department announced on Thursday the launch of a pilot program to provide taxpayers with access to low-cost financial accounts. This is the second action in the past month the Treasury Department has taken that would affect the RAL industry: In August, the IRS announced that it would stop providing debt indicators—used in RAL underwriting—when acknowledging e-filed returns (see “IRS Will Stop Providing Debt Indicators”).

 

Under the pilot program, certain low- and moderate-income taxpayers will be offered low-cost accounts with debit card access so they can receive direct deposits of their tax refunds. It will also test offering accounts that can be used year-round to deposit other funds. The announcement did not offer any details on how the accounts would work or what financial institutions, if any, would be involved.

 

The pilot program is expected to launch during the next tax season. The Treasury Department will mail information about how to sign up for the accounts to individual taxpayers who have received paper refund checks in the past. It will also partner with payroll companies to insert offers into paychecks and paystubs of individuals who do not currently receive their tax refunds through direct deposit.

 

The Treasury Department announcement, citing FDIC figures, said that 9 million households in the United States have no bank account and another 21 million are “underbanked”—meaning they have a bank account but still rely on check-cashing services. The Treasury Department is concerned that these individuals are forced to “turn to high-cost alternative financial products—such as check-cashing and other services” because they do not have an account in which to receive their tax refunds and presumably do not want to wait for a paper refund check to be mailed.

 

More from the JofA:

 

 Find us on Facebook      Follow us on Twitter

 

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.