Using Tax Refunds to Increase Savings and Retirement Security
Posted by on August 25, 2006
The Retirement Security Project Using Tax Refunds to Increase Savings and Retirement Security
By J. Mark Iwry
The Retirement Security Project is supported by The Pew Charitable Trusts in partnership with Georgetown University’s Public Policy Institute and the Brookings Institution.
Most American households receive an income tax refund every year. Instead of receiving the refund in the form of a check, a taxpayer may instruct the Internal Revenue Service to deposit the refund in a designated account at a financial institution. However, the direct deposit can be made to only one account. This all-or-nothing approach discourages many households from saving any of the refund. When some of the refund is needed for immediate expenses (as is often the case), depositing the entire amount in a saving account, such as an individual retirement account (IRA), is not a feasible option. Yet the IRS does not currently permit the direct deposit of only part of the refund in such an account.
http://www.retirementsecurityproject.org/pubs/File/SplitRefundIwryFinal.pdf
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