TROY, Mich.–With the April 18 tax day approaching, new research from J.D. Power suggests credit unions have an opportunity to reduce the “tax anxiety” being felt by many this year.
According to the latest J.D. Power data, more than three-fourths (76%) of bank customers in the United States have some sort of worries about their taxes, and 21% say they have more fears about this tax season than normal.
“That’s noteworthy, because many customers use their tax returns to inject some much-needed capital into their finances,” J.D. Power said. “And with just 33% of respondents financially healthy customers may need some help in navigating this tax season to avoid further financial worries.”
A Stagnant Landscape
According to J.D. Power, as the end of Q1 approaches, there has been no noteworthy change in overall financial health. One-third (33%) of respondents are financially healthy, while 41% are vulnerable, the company said.
In addition, it reported the overall level of inflation recognition also remains unchanged at 66%. The percentage of customers that said the price of goods are increasing faster than their income is virtually identical to the February 2023 report, as well, J.D. Power added.
Tax Troubles
“With the financial landscape relatively unchanged, customers enter a tax season filled with new filing requirements and thresholds with some consternation,” J.D. Power said.
Among the company’s findings:
- Nearly half (48%) of bank customers say they complete their taxes themselves (38% using software, 10% without software), while 35% say they use a service or a preparer.
- The stressed (45%) and overextended (43%) are most likely to use a software to complete their taxes themselves, while financially healthy customers (41%) are most likely to use a preparer.
- Bank customers’ worries center on the fear of sticker shock, as 20% worry that they’ll end up owing more than planned, and 16% fear they may not get any refund. “Both of those scenarios would mean a huge financial setback to customers, many of whom rely on the liquidity to help them pay down debt or keep up with existing expenses,” J.D. Power stated.
- What’s more, half of bank customers (50%) say it is somewhat of a burden to make their tax payment, and 17% say it is an extreme burden. Of banking customers that have tax repayment, J.D. Power reported 21% are creating new debt by either borrowing from a friend or family member (11%) or taking out a loan (10%) to make that payment. Another 9% said they don’t know where they will get the money for tax repayment.
CUs to the Rescue
J.D. Power said that as customers contend with this anxiety, financial institutions are hoping to step up and help guide their customers through it.
“Some fintech firms are rising to meet this challenge, helping banks install solutions that help their customers make tax-savvy decisions all year long,” J.D. Power said. “Yet just 38% say they have received any messaging about tax assistance at all.
“While it is encouraging that even a small percentage (12%) of customers indicate having received three or more types of messaging on tax assistance, the market for that help is far more robust,” J.D. Power continued. “Nearly half (46%) of the vulnerable population and 61% of the stressed population don’t know if they received tax advice from their banks, which clearly shows banks need to find a way to be more proactive and clear in their messaging, particularly to the customers that need it the most.”
Building Trust
According to J.D. Power, there remains a “wide-open space” for both more fintech firms and traditional incumbents to offer services that could bring advantages to customers and their financial institutions.
“Some customers, particularly those under-40, say their biggest tax worry is trusting their preparer (9%),” J.D. Power said. “That number is three-times higher than the over-40 population (3%). If a bank, especially one that has their customers’ trust already, can help a customer make better tax decisions and ultimately get a better return, that customer will likely be far more inclined to stay in-house when using that return, whether that’s in the form of making a down payment on a home, taking out an auto loan, or paying down debt.”
Challengers Offer a Challenge
J.D. Power said some
challenger brands are already rising to meet this challenge, including:
- CashApp, which acquired Credit Karma Tax in 2020. It offers both federal and state tax preparation services at no charge, on top of offering traditional services around banking, investing, or sending and receiving money
- SoFi, offer everything from basic banking services and credit cards to mortgages and loan refinancing and investing, and even comparison shopping for insurance. But not tax preparation.
What the Data Show
“Data consistently show that as customers use more bank services successfully, they become further engaged and, therefore, less likely to leave the branch and less likely to move deposits elsewhere,” J.D. Power said. “If banks can bolster their services with tax solutions that can have a meaningful effect for their customers, they’ll likely see a significant return on their investment.”
It’s Called Fresh for a Reason. And We Offer Home Delivery. For Free!
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com