January is a busy month at the IRS because most people get tax refunds and they file early to get their money ASAP.
The IRS has for years been pushing direct deposit of refunds and those efforts have paid off. Last year, 68 percent of taxpayers had their refunds sent straight to a bank account.
But not everybody who gets a refund has a bank account; the buzzword is "unbanked." So Uncle Sam has come up with a plan this filing season for them. Treasury will send 600,000 low- and moderate-income unbanked taxpayers their refunds via a special prepaid debit card.
The MyAccountCard Visa Prepaid Debit Card got good reviews from the consumer advocacy groups. To be honest, I was a bit surprised by that, since some of the cards issued this filing season will include fees.
Those fees caught the eyes of other folks, too, including Congress. And a couple of lawmakers want an explanation.
Ways and Means Chairman Dave Camp (R-Mich.) and Oversight Subcommittee Chairman Charles Boustany (R-La.) have asked Treasury Secretary Timothy Geithner for more details on the program, including how recipients of the pilot program were chosen and an explanation of all of the fees and charges that will be incurred by some of taxpayers enrolled in the pilot program.
In a letter to the Treasury Secretary, the Representatives said they are concerned about general oversight of the program:
If the goal of the Treasury Department is to "provide a safer, faster and more convenient way to receive a federal tax refund as well as other regular income," it is important that these cards provide adequate consumer protections.
Camp and Boustany also are worried that this debit card refund plan could lead to expanded government efforts that they believe are best served by the private sector:
We are also concerned about "mission creep." The program appears to have begun as a narrowly crafted solution to a narrow problem: reducing the number of paper checks by getting tax refunds in the hands of those who may not have bank accounts. However, from Deputy Secretary Wolin's comments, the program seems to now have morphed into an effort to establish ongoing bank accounts for low-income taxpayers. Since the financial services industry is already competitive (with banks and credit unions actively pursuing new account holders), we question the wisdom of the Federal Government becoming so involved in the financial affairs of individual taxpayers.
The Ways and Means members asked Geithner for answers and additional information in 10 areas of the tax refund debit card pilot program:
- Describe the program as a whole, its implementation schedule, and any analyses regarding perceived benefits both to the government and to the taxpayer by switching from refund paper checks to prepaid debit cards. Provide any analyses conducted regarding the percentage of cards that may never be used.
- Provide a copy of all program materials, including each version of the invitation letter, which will be sent to taxpayers seeking their participation in this pilot program.
- Describe how the sample of 600,000 taxpayers was chosen. Further., describe how a subset of those individuals was chosen to be offered cards with a $4.95 monthly fee.
- Do any of the taxpayers in the sample currently have a bank account?
- Provide an explanation of all fees and charges that will be incurred by taxpayers enrolled in the pilot program, including monthly access fees, ATM fees, overdraft fees, per use charges, inactivity fees, and charges related to lost or stolen cards.
- Provide any analyses or documents concerning the vulnerability of taxpayers enrolled in the pilot program to identity theft. Describe the consumer protections provided by these cards. Explain what the maximum liability is for taxpayers who lose debit cards or when card numbers are obtained by thieves to steal account funds or other sensitive information. Who is responsible for such losses, the program manager, the taxpayer, or the Government?
- Provide all schedules of fees and charges that will be paid by the Federal Government as a result of this program.
- Describe the steps Treasury plans to undertake to conduct oversight of this program, and for how long Treasury will provide oversight of these cards. Provide the names and titles of the individuals at Treasury charged with overseeing this program.
- Describe the method by which Bonneville Bank and Green Dot Corporation were selected by the Department of Treasury. Which entity was selected as the prime contractor? How was the subcontractor selected, and by whom? Please advise as to whether the contract vehicle was a sole source, a set-aside (and if so, under what authority), or any other vehicle other than a full and open competition.
- Provide copies of the solicitation, the statement of work, the evaluation criteria, the award letter, the contract itself, and any appended terms and conditions. Provide a list of all unsuccessful bidders. Provide all analyses justifying the selection of Bonneville Bank and Green Dot Corporation.
The Congressmen want the answers by next week; specifically, no later than Feb. 3.
Don't worry. Although I'm just now getting around to blogging this (it's been a crazy tax week!), their letter went to Treasury on Jan. 20 so Geithner and crew have had some time to work on answering the Congressmen's questions.
Next week, we'll see if the response is satisfactory.
- New federal tax refund debit cards for taxpayers
without bank accounts
- IRS launches smartphone app
- Taxes? There are apps for that
- IRS making it harder to file paper returns
- Direct deposit to replace U.S. checks
- The IRS' electronic future
- EFTPS 'R' Us
- IRS has almost $165 million in refund money it can't deliver.
Is some of it yours?
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