The FDIC Is Working To Turn Taxpayers into Smart Banking Customers
The Federal Deposit Insurance Corp. and the Internal Revenue Service are working with consumers who are eligible for the Earned Income Tax Credit (EITC) to foster banking relationships and provide them financial education.
The EITC is a special tax benefit approximately 22 million low-income families who make less than $35,500 a year are eligible for. The IRS, through its 48 Voluntary Income Tax Assistance (VITA) sites around the country, offers free tax help to eligible wage earners and helps consumers obtain the tax credits to which they are entitled.
The FDIC, under an agreement announced in January, is working with these VITA sites and the 265 coalitions that assist them in the following areas:
- Identifying financial institutions that may be interested in working with these sites;
- Providing FDIC points of contact and information that can be passed along to taxpayers about the FDICs computer-based Money Smart program, the self-paced education program available in English or Spanish at no cost.
- Notifying financial institutions about opportunities to work with taxpayers to open bank accounts at VITA locations.
Workers who qualify for the EITC and file a federal tax return can get back some or all of the federal income tax that was taken out of their pay during the year. They may also get extra cash back from the IRS. In 2004, IRS estimates show that about $38 billion was paid to these taxpayers, which in turn flowed into their communities. But the IRS says millions more are eligible and do not claim the credit. The maximum EITC is $4,300 for a family with two or more children.
The FDIC and its Money Smart partners last year hosted VITA sites that helped over 3,400 families file EITC claims totaling more than $5.1 million, with an average return of about $1,485 per family.
Use of EITC refunds to establish or build savings in low-cost or no-cost bank accounts represents an excellent opportunity and important step to begin building financial security for many families in low-income communities, said FDIC Chairman Donald E. Powell. Low-income workers may have difficulty saving part of their wages for long-range goals. EITC can make that more feasible for them.
We are pleased to be working with the FDIC on this important area, said IRS Commissioner Mark W. Everson. We want all people eligible to claim the EITC benefit to get it. People who want to get the full benefit of EITC should look into getting banking services, which allows direct deposit of refunds and avoids expensive convenience charges from check cashing or refund loans.