WASHINGTON–The Bureau of Consumer Financial Protection has published a new paper suggesting the approaching tax season is a unique opportunity for many people, especially low-income individuals, to make some decisions around savings.
In the paper, the BCFP says there are three reasons for lower-income consumers to give more thought to personal savings at tax time:
- The tax refund is the biggest single lump sum they likely will receive all year
- With little to no savings, lower-income consumers are more economically vulnerable to financial shocks
- Filing a tax return provides an “easy and automatic way to save some or all of their tax refund”
The paper, “Building a Brighter Future by Saving at Tax Time,” also offers other suggestions on ways lower- and moderate-income consumers save and how saving activity can be better measured.
The Data
The BCFP reported during the 2017 tax season 255,902 consumers had their taxes prepared at a site using BCFP information, and that of those 181,598 consumers received a refund.
Of those receiving a refund, the BCFP said, 64,539 claimed the Earned Income Tax Credit; 125,199 used direct deposit to receive their refund; 4,375 used Form 8888 to split their refund, and 848 purchased U.S. Series I Savings Bonds.
The BCFP paper also identifies two new practices adopted by several VITA programs to help lower-income consumers save. The first, “Special Financial Well-Being Events,” connects tax filers to financial education, credit counseling, and other services associated with their personal finances through community partners and other taxpayers through local events.
The second, “Advisory Groups to Develop Tax Time Savings Strategies for VITA,” aim to help develop a more community-focused saving encouragement effort and increase tax time saving, the BCFP stated.