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New Split-Refund Option Helps Taxpayers Save

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(ARA) – Personal spending is up — conversely, personal saving is down. In fact, according to the most recent Commerce Department report, the savings rate for Fiscal Year 2006 was a staggering negative 1 percent. The translation: Americans spent more money than they earned — borrowing against their savings to make purchases.

What makes this information so eye-opening? Not since the Great Depression (1932 and 1933) has the U.S. savings rate been negative for an entire year.

Experts agree our nation’s consumer spending craze is a recipe for disaster and underscores the need for increased savings — especially in view of approximately 78 million Baby Boomers approaching retirement. Rather than saving for the Golden Years, Boomers are following the increased spending trend by dipping into their nest egg — creating substantial concern that the number of low-income households in America may soon rise sharply.

Due to the considerable savings decrease, the government is looking to the nation’s tax system to encourage consumer saving and increased banking. As a means to stimulate taxpayer savings, the IRS has rolled out a new option for the 2006 tax season known as the Split-Refund option.

For many people, their tax refund represents the largest lump-sum of money they receive during the course of a year. The Split-Refund option now allows taxpayers to use direct deposit to channel their tax refund into as many as three savings accounts — making it easier for many families to designate all or part of their refund to savings and investment vehicles.

According to the IRS, direct deposit is now used by over half of all refund filers. What’s more, during Tax Year 2005 (TY05), the IRS issued 100 million refunds (from 133 million tax returns) amounting to $217.6 billion. Of those figures, 52.7 million refunds amounting to $134.2 billion were deposited directly into bank accounts.

Split-Refund allows taxpayers using the Form 1040 series to conveniently designate (at the time your return is filed) and deposit refunds with any U.S. financial institution. For those of you who plan to submit a paper return and also want to direct deposit your tax refund into multiple accounts, use IRS Form 8888 to designate which accounts and amounts you want your refund deposited — simply list the account and routing numbers for any account in your name and attach it to your tax return. If, however, you want your entire tax refund deposited directly into one account, you can still use the appropriate line on Forms 1040, 1040A/EZ, 1040NR, or any of the other 1040 forms.

If you’re a do-it-yourself preparer who is planning to file your return using tax software or Web-based services this tax season, the popular tax program –TaxACT — leads the tax software industry this year by developing its product line to enable the Split-Refund deposit.

‘Automated savings has proven to help people be far more successful while meeting their savings goals because you pay yourself first — before engaging in personal spending. Refund Splitting provides a mechanism that makes it easier for families of all income levels to take advantage of the tax preparation process to boost their savings,’ says Stephanie Behrends, spokeswoman for 2nd Story Software, Inc. — makers of TaxACT.

The company conducted a tandem online survey during the month of January 2007 and found that 17 percent of respondents plan to put the money into a savings account or an investment shelter, such as making a down payment on a home. An overwhelming 59 percent of respondents plan to use their refund to pay down debt.

‘Paying off bills, looking to homeownership as an investment vehicle, and saving money shows there is a great sense of economic uncertainty shared by Americans. The Split-Refund option is but one of the latest changes in our tax system that taxpayers need to learn so that they can draw the maximum benefit from several new tax saving credits and incentives,’ says Behrends.

This year, because April 15 falls on a Sunday and April 16 is a legal holiday in Washington, D.C., you have until April 17 to file your return (without receiving an extension). If you’re interested in learning more about the Split Refund option or other tax saver credits, be sure to visit More information regarding TaxACT can be found by visiting

Courtesy of ARAcontent

Sponsored by Peter M. Galde who is the founder and principal at Cornerstone Capital Funding, 14520 Mono Way, Suite 110, Sonora Ca. 95370. Peter has 28 years experience in the finance industry. E mail Peter or call him on 209 532 7711 for further information.