Treasury Explores New Tax Refund Mechanism

January 14, 2011 Taxation in USA

Blue cardThe US Treasury is encouraging taxpayers to sign up for a new project which will see tax refunds deposited directly onto new debit cards issued by the Government.

On January 13th the US Department of the Treasury announced its new program, offering low- and middle-income taxpayers an opportunity to receive their tax refunds directly on prepaid debit cards which are provided by the Government.

According to the Treasury, the program will begin with 600 000 selected taxpayers receiving letters urging them to consider activating a MyAccountCard Visa® Prepaid Debit Card. Timing of the project has been choreographed to ensure that taxpayers will receive their 2010 tax refunds on the new card. Additionally, any of the 1.7 million taxpayers who currently receive their regular income payments on a payroll card will also be eligible to receive a prepaid debit card under the new program.

In a statement released on January 13th, the Treasury Department claimed that prepaid debit cards have the potential to greatly reduce the time taken to complete a tax return and any subsequent refund, while retaining higher levels of security than traditional filing methods. The US Treasury has already stated that in the last season it had spent USD 40 million on the expenses surrounding issuing check based tax refunds.

The Treasury statement added that the card system will have a secondary benefit of offering typical debit card services to lower-income families, who would typically not have access to traditional banking services. Deputy Secretary of the Treasury Neal Wolin elaborated, saying, “This innovative card can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures.” It is expected that if the initial pilot project is proven to be successful, the system will be expanded to greater numbers of taxpayers.

Photo by MyTudut