Debit card may replace IRS checks
Published 6:18 pm Friday, December 9, 2011
The income tax refund check could soon be a thing of the past in the state of Alabama.
The Alabama Department of Revenue has at least considered doing away with the traditional tax refund check, replacing the monetary disbursement method with a prepaid debit card.
“I know that it is something that the department is exploring,” Alabama Department of Revenue Media Affairs Representative Carla Snellgrove said of the potential move. “I know there has been some discussion about that but I don’t have a hard date.”
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While the department has not announced its intentions regarding the matter, some professional tax preparers have been told to anticipate the change.
“Any refund payments after July 1, 2012 will be issued with a debit card,” Rob Pearson, Certified Public Accountant for Mason and Gardner, said of what he and others attending a recent seminar were told. “They are citing that the cost of issuing and processing a paper check is higher than issuing and processing the debit cards.”
While the move could potentially be a considerable cost-cutting measure for the state, there is some question as to whether the decision would eliminate expense or simply shift a portion of it to other entities.
“The state says checks cost it as much as $10 to $12 per to process,” Pearson said. “Debit cards would be cheaper on the state, but debit cards have transaction fees on the user and/or transaction fees on the retailer.”
In addition to the question of expense on the consumer or retailers, many tax preparers also recognize the potential security risks that accompany the mass issuing of debit cards.
“For security, the cards are mailed separate from the (personal identification number), so opportunity for confusion exists,” Pearson said.
The move, if made, would be similar to a shift made by the state of New York earlier this week when its Department of Taxation and Finance announced taxpayers would have the option of getting their refund via debit card or check as well as continuing to offer the direct deposit option.
“They are really encouraging people to put down a bank account on their return,” Pearson said. “We already recommend that you put a bank account on the tax return and get your refund direct deposited. Usually your refund comes quicker if you use direct deposit.”
Snellgrove added that while the department is considering the debit card option, the initiative will not come to fruition during the next income tax filing season.
“That is something the department is exploring,” Snellgrove said. “That is something that will not effect this upcoming filing season. Right now, it is something that we are looking at.”