Some IRS tax refunds will be on debit cards

NEW YORK – 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.

The new debit card, called MyAccountCard, is issued by Bonneville Bank, a community bank based in Provo, Utah. It will bear a Visa logo.