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.
What makes this information so eye-opening is that not since the Great Depression 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 the approximately 78 million baby boomers who are 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 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 Internal Revenue Service has rolled out a new option 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 the 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 investments.
According to the IRS, direct deposit is now used by over half of all refund filers. What’s more, during tax year 2005 the IRS issued 100 million refunds amounting to $217 billion. Of that amount, 52.7 million refunds amounting to $134.2 billion were deposited directly into bank accounts.
Split-refund allows taxpayers using Form 1040 series to conveniently deposit refunds with any U.S. financial institution. If you’re a do-it-yourself tax preparer who is planning to file your return using tax software or Web-based services this tax season, the popular tax program TaxACT (found online at www.TaxACT.com) leads the tax software industry 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,” said Stephanie Behrends, spokeswoman for TaxACT.
“Paying off bills, looking to homeownership 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,” Behrends added.
Go online to www.IRS.gov to find out more about the split refund option or other tax saver credits. www.TaxACT.com.
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.
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