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Tax Prep Dispatch: An Ode to Form 8888

Editor's Note: This edition of the Tax Prep Dispatch was written by Cary Gladstone, Senior Director of Asset Building Strategies at Granite United Way and Chair of the CA$H Coalition of New Hampshire.

Seven. There are seven ways to get a refund at tax time. Can you name them?

We have a responsibility to our tax filers to make sure they understand their options when they are getting a refund, including the ways they can build savings at the time. In general, most filers opt to have the entire refund deposited into their checking account as it's safer and quicker than getting a check in the mail. For those who want to split their refund, however, we also have a responsibility to know how to enter the split using Form 8888, Allocation of Refund, whether using TaxSlayer or another platform.

When Form 13614-C, Intake, Information & Quality Review Sheet, asks the refund-splitting question and the taxpayer marks off the “No” box, I encourage my preparers to not take “no” for an answer. Some volunteers have said it feels like a sales pitch to ask out loud a question the filer has answered on paper. But many taxpayers have reached their limit of questions by page three, and reflexively respond with a “no” to everything not required of them. At that point in the process, they don’t even know how much of a refund they are getting (or even if they are getting one). And besides, we don’t make any kind of commission on a savings bond or for putting money into a savings account that the filer already has. We recommend saving because it’s in the taxpayer’s best interest.

It’s also our responsibility to understand and be able to explain the U.S. Series I savings bond, how it is purchased, the current rate of interest and that taxpayers can buy it for themselves or someone else. (Your SPEC Relationship Manager may have provided fact sheets for both taxpayers and volunteers. Also, more information can be found here [[link removed]].) The bond is not for everyone, but it can kickstart a long-term savings program for a parent who wants to open a college fund but doesn’t know where to begin, or help someone considering first-time homeownership but with a time horizon at least a few years out. I once saw a father of a young son walk out of our VITA site with a little straighter back, having committed to saving for his son’s education.

At 2.22% the bond currently pays a better interest rate than most savings accounts or certificates of deposit. The rate may go down on this variable rate product, but it cannot lose money. Can you say that about stocks? Plus, tax preparation is the only place you can still get a paper bond. That can make it more enjoyable for many taxpayers to have a tangible gift—for example, grandparents buying bonds for grandchildren.

Of course, the Save Your Refund [[link removed]] promotion may make a difference in getting a filer to commit to savings. Sponsored by the AARP Foundation, the promotion is giving away $30,000 in cash prizes to those who split at least $50 of their refund into a savings product. And, as a recent study by Prosperity Now [[link removed]] reveals, many filers do fulfill the intention to save later. The VITA community has embraced Save Your Refund as a way to help taxpayers save by providing the opportunity to win cash prizes during tax season and with two grand prizes at the end.

VITA also plays a role in educating those who come to our sites in ways that can financially empower them. Many filers don’t realize they can split their refund between three accounts and that they have three choices when it comes to getting a U.S. Savings Bond. So, for example, a filer could split their refund into:

A portion in a savings accountA portion in an IRAA portion in a 529 planA U.S. Series I savings bond for the taxpayerA savings bond for a granddaughterA savings bond for a grandson

Okay, so that was six of the seven ways to get a refund. Can you name the last one? Yes, it’s the good old-fashioned paper check.

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