Tax time provides a unique opportunity to build financial security.
The annual federal tax refund is the largest sum of money many American households receive all year, amounting to as much as 20% of annual household income. Households making less than $50,000 claim $100 billion in federal tax refunds each year, with an average federal tax refund of $2,792 for these families. With this windfall comes a unique opportunity to build financial security.
The tax-time moment is ideal for efforts to influence financial behaviors because it predictably happens every year and people are already thinking about their finances. Most tax filers use electronic filing tools that include the option to split their refund and direct deposit it into multiple accounts which makes saving easier. In most cases a tax preparer or tax software is on hand to prompt tax filers to consider new financial behaviors.
Commonwealth has already successfully advocated for two policy interventions and piloted a project with tax preparers to address the financial challenge of saving at tax time. We see additional opportunities to use tax time to address other financial challenges.