Some States Issuing Debit Card Tax Refunds In Lieu Of Paper Checks

Posted on January 27, 2012 by Max

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The 2011 tax season witnessed the launch of income tax refunds issued in the form of preloaded debit cards. Geared towards “unbanked” Americans, or the portion of the population not in possession of any type of bank account, the Treasury claimed that the aim of the debit cards was to provide a “safe, convenient and low-cost financial account for the electronic delivery of their federal tax refunds,” according to online news source Bank Rate.

Because individuals without a bank account are often faced with having to pay a service charge in order to get their tax refund checks cashed, receiving a refund via debit card seems like a good option. It may also deter people from opting to take out a pricey refund anticipation loan, the short-term loan many professional tax preparation services offer based upon a flier`s anticipated refund amount. Filers with a bank account can choose to have their refund direct deposited, which generally makes the funds accessible to them anywhere between 10 days to three weeks after filing.

Now for the 2012 tax season a few states have taken the government-issued debit card tax refund plan a step further by entirely eliminating the option for taxpayers to receive their refund by paper check. States such as Louisiana and Oklahoma are mandating that all citizens deserving of income tax refunds choose between one of two options – either have the refund direct-deposited into their savings or checking account or receive the refund on a preloaded debit card. Paper checks will no longer be issued in either state. Oklahoma expects to save millions of dollars as a result of not having to send out paper refund checks, while Louisiana estimates a savings of around $500,000 annually.

Georgia, which participated in the debit card tax refund trial program last year, is allowing their taxpayers this year to choose whether or not they would like to receive their refund in the form of a debit card, paper check or direct deposit. Georgia`s Department of Revenue anticipates that, in time, it will go the route both Louisiana and Oklahoma have gone and eliminate the paper refund check option entirely.

Oklahoma residents who get their tax refund on a debit card this year have to use it fairly soon after receiving it in order to avoid being penalized. A $1.50 fee will be deducted from refund amount loaded onto the card each month following a 60 day period of inactivity. The fee will be collected by Affiliated Computer Service, the vendor administering the program.

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