N.Y. state makes prepaid an option for tax returns

Beginning in 2012, New York state taxpayers will be given the option to receive state income tax refunds on prepaid cards. The New York State Prepaid Refund Card will be available to taxpayers as a tax refund option alongside paper checks and direct deposit.

Ed Walsh, Public Information Officer at the New York State Department of Taxation and Finance, said the MasterCard Worldwide-branded cards will be issued by Bank of America Corp. and taxpayers will be able to access funds via the Allpoint ATM network, which boasts 43,000 surcharge-free ATMs worldwide. The prepaid card option will appear on 2012 tax forms, Walsh added.

Taxpayers who choose to receive the cards by checking the box on the forms can use the refund-loaded cards to pay bills and make purchases online, by telephone and at retail locations. The state government agency said taxpayers can make in-person cash withdrawals at most banks, with the first cash withdrawal at a bank being free; the entire tax refund balance can be withdrawn from the bank at that time. Taxpayers can also get cash back at most retail locations, the agency added.

Walsh said the prepaid card is designed to move taxpayers away from receiving refunds by paper check. Walsh did not know how much the agency expects to save in overhead costs from reduced check handling and processing. But the U.S. Department of the Treasury, citing Mercator Advisory Group statistics, said it costs 98 cents to issue one paper check payments but just 10 cents to distribute those same funds electronically.

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