There are also a number of prepaid card options offered by private companies specifically targeted for delivery of tax refunds, some of which are discussed in Sections II.G, below. There are similar prepaid debit cards available to taxpayers who use free VITA sites.
Regulations issued by Treasury’s Financial Management Service govern the deposit of federal payments, including tax refunds, to prepaid cards. These regulations require that the deposit be subject to FDIC insurance, require compliance with the Regulation E protections for payroll cards, and prohibit deposit to a card that has an attached line of credit or loan feature for which payment is automatically triggered when the federal payment is delivered.
When optional, taxpayers should be cautious if considering prepaid cards. As with any financial product, taxpayers should compare costs and consumer protections when choosing among options. Some types of prepaid cards have lower fees and better protections than others.
Add-on fees are fees separately charged by tax preparers. They are in addition to the RAL or RAC fees charged by the banks. Add-on fees for RALs and RACs appear to be a large source of profits for some preparers.
Some of these examples include:
All three of the major tax preparation chains-H&R Block, Jackson Hewitt, and Liberty Tax-had promised to stop charging add-on fees several years ago. However, Jackson Hewitt started charging add-on fees again in 2010, specifically a “Data and Document Storage Fee” of up to $40.