An Easier Way to Save: The IRS Implements "Split Refund"

For many Americans, tax refunds are the single biggest lump sum of money they will receive all year. Next year, as millions of federal taxpayers calculate their refunds, they will have the opportunity to put some of the refund away for a rainy day. The Internal Revenue Service has new options for direct deposit of refunds. The IRS is allowing taxpayers to split their refunds into three different accounts by filling out a new form—Form 8888. Taxpayers may direct-deposit parts of their refund into retirement and emergency funds and still have money left over to pay bills.

With the savings rate of Americans at an all-time low since the Depression, as ABC News reported in January 2006, many do not have emergency funds to weather a job loss or medical expenses from sickness or injury, and so they leave themselves on the edge of financial ruin. However, policies that simplify saving money and building assets are more effective for Americans across all economic levels.

“The ability to split a refund before the check is in their hands gives many Americans an easy way to start or add to a savings or retirement account,“ said Dory Rand of the Sargent Shriver National Center on Poverty Law. “Assets such as savings or retirement accounts are the building blocks to financial security.”

The Shriver Center, cochair of the Illinois Asset Building Group, is invested in building the stability and strength of families and communities through increased asset ownership and asset protection. Along with community groups, banks, regulators, and researchers across the country, the Shriver Center advocates expanding asset-building opportunities.

For more information, contact Dory Rand or Jami Schlafer at the Shriver Center.