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Treasury launches debit card pilot for tax refunds

NEW YORK (AP) — Low-income taxpayers who don’t have bank accounts will be able to get their tax refunds this year on prepaid debit cards supplied by the government, the Treasury Department said Thursday.

The department plans to send letters to 600,000 households next week, asking them to take part in a pilot program to put their tax refunds on the debit cards, which can be used to get money from ATM machines, pay bills or to buy goods and services from retailers.

The Internal Revenue Service is aiming to reduce the amount of paper it handles. To encourage taxpayers to file their returns electronically, for instance, the IRS is not mailing paper forms to taxpayers this year.

It will still be sending out refund checks but is seeking to reduce the number — about 35 million were mailed in 2010 — by encouraging direct deposit. For those without bank accounts, the debit cards will allow them to avoid check-cashing fees or costly refund anticipation loans and checks.

Direct deposit is also faster. It takes 10 days or fewer for the IRS to process a tax return and deposit a refund electronically. A mailed paper check may not reach a taxpayer for up to six weeks.

The new debit card, called MyAccountCard, is issued by Bonneville Bank, a community bank based in Provo, Utah. It will bear a Visa logo. Funds on the card are backed by Federal Deposit Insurance Corp. like regular bank accounts.

Treasury said it will test different fees as part of the pilot. Half the cards in the pilot will include no monthly fee, while the other half will carry a $4.95 monthly fee.

Cardholders won’t have to pay service fees if they use the cards to withdraw money from ATMs in the MoneyPass network. All of the cards will carry a $2.50 fee for out-of-network ATM withdrawals, and a 50-cent fee for using out-of-network ATMs for balance inquiries.

There may also be a fee up to $4.95 for making in-person deposits on the cards, which can be done at retailers like Walmart stores, 7-Eleven, K-Mart and major drug store chains.

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