- Days left

IRS Issues Prepaid Debit Cards for Taxpayers

IRS issues pre-paid debit cardsWith tax season coming to an end in the next few weeks, taxpayers and the Treasury Department alike will be waiting to see the results of a pilot program for issuing refunds on prepaid debit cards. The program was rolled out to a limited pool of taxpayers this January.

The program, which was introduced to 600,000 households, was intended to offer taxpayers an alternative to the controversial "refund anticipation loans." Since many low-income taxpayers don't have access to banks to cash tax-refund checks, a number of retail tax preparers issued prepaid debit cards to their customers loaded with the refund amount, minus fees and interest. And there's the problem. The IRS has been looking at ways to effectively put an end to the loans, but has also recognized that there are few other options for many taxpayers.The new Treasury Department-issued debit card would allow taxpayers to take advantage of the direct deposit program even without a bank account. In theory, this should mean taxpayers would shy away from the costlier retail loan options. "This pilot program will provide low- and moderate-income Americans with a low-cost option for faster delivery of their federal tax refund," said Deputy Secretary of the Treasury Neal Wolin. "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."

For the pilot program, the Treasury is issuing a prepaid debit card called MyAccountCard. The card is issued by Bonneville Bank out of Provo, Utah, and since it's backed by a bank, the FDIC insurance rules apply -- that means money on the card is insured just as it would be in a traditional bank account. Federal law also protects the taxpayer if the card is lost or stolen, unlike cash. Certain limitations apply and you will be required to pay a $4.95 lost or stolen fee for a replacement card.

The debit card is a Visa. If the card is lost or stolen, the Visa® Zero Liability policy would protect taxpayers against any unauthorized transactions, so long as the theft is reported promptly.
Unlike many of the retail card products, there are no overdraft and check-cashing fees associated with MyAccountCard. Cash withdrawals at 15,000 network ATMs are free. A service fee applies for out-of-network ATM withdrawals.

The Treasury hasn't determined whether monthly fees will be attached to the card. During the pilot program, there will be several variations of the card, including some with monthly fees. The fee range will be from zero to $4.95 per month during the pilot program; those fees will be randomly assigned to taxpayers participating in the program. You can find a list of all the fees associated with the card on MyAccountCard's website.

The normal rules related to refunds would still apply. That includes the right of the Treasury Department to offset the refund to satisfy a delinquent debt, including past-due child support obligations, tax bills and defaulted student loans.

The Treasury Department likely won't have any firm data on the strength of the program for some time. Taxpayers, however, are bound to express their opinions before a final report comes out. How successful do you think it will prove to be?

Increase your money and finance knowledge from home

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

TurboTax Articles

Will Medicare/Medicaid be Impacted by ACA?

The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

What are 1095 Tax Forms for Health Care?

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Add a Comment

*0 / 3000 Character Maximum