by Heidi Goldberg

A recent NLC Web seminar highlighted a new way cities can help families allocate their tax refunds toward saving for the future.

?Using Refund-Splitting at VITA Sites,? hosted by NLC?s Institute for Youth, Education, and Families (YEF), offered information about a new IRS policy that allows people to save a portion of their tax refund in 2007 and beyond.

Refund Splitting
?Refund-splitting? allows tax filers who are receiving a refund to divide their refund among up to three direct deposit accounts in multiple financial institutions. This has far-reaching implications for many low-income families who are eligible for the Earned Income Tax Credit (EITC).

For many families, the EITC is the largest lump sum of money they receive all year. The average EITC refund is about $1,500 per family. This money is often used to pay down debt or bills.

Tax time can be a window of opportunity for families to begin accumulating savings by allocating a portion of their refund toward a savings account or a matched savings program such as an Individual Development Account.

Encouraging Savings
Pilot projects over the past decade have shown that many working poor families recognize the importance of assets and are motivated to save for their families? futures.

Research has shown that people are more likely to save when using tools such as an automatic payroll deduction that systematically facilitate the saving of a portion of their paycheck. 

People in low-wage jobs often do not have this opportunity. However, refund splitting provides a similar assisted saving mechanism, allowing a single decision made during the tax preparation process to ensure that an individual with a desire to save can easily do so.

Seminar Speakers
The Web seminar featured three speakers who are experts on this topic. Jeff Zinsmeyer, executive director of D2D Fund, began the seminar by introducing the concept of refund-splitting and why it is an important tool for cities. Zinsmeyer is the primary author of a refund-splitting guide for tax preparation sites, and the D2D Fund has conducted a study of refund-splitting at pilot project sites in various cities across the country.

The other two speakers ? Mary Ruth Herbers, senior director of programs at the Center for Economic Progress in Chicago, and Pam Smith, Earned Income Tax Credit manager at the Community Action Program of Tulsa, Okla. ? discussed how they helped their cities launch pilot programs and shared their experiences and lessons learned.

Speakers also stressed the importance of marketing the savings opportunity to residents in advance to ensure that they have proper identification and all account numbers with them when they visit a tax preparation site. In addition, the seminar shed light on how cities can help residents open new accounts if needed.

Listeners also learned the importance of ensuring that tax sites have strong relationships with financial institutions that offer solid, low-cost financial products, such as low-fee checking accounts, to the low-income tax filers who use the sites.

Details: For a recording of the web seminar along with the presentation materials, visit www.nlc.org/iyef and click on ?Events and Audioconferences? and then click ?Audioconference and Web Seminar Recordings.?

For more information about refund-splitting, including the ?Refund-Splitting Guide,? visit www.splitrefunds.net.

To learn more about how your city can become involved in promoting the EITC or asset-building initiatives, contact Heidi Goldberg at goldberg@nlc.org or (202) 626-3069.