Part 4/5 Tax Filings and Recoveries
Direct Deposits have accelerated many tax returns. While these appear to mirror the refunds, what we do see in the data is that more consumers are taking direct deposit. From approximately 4 in 5 in 2009, we now see numbers above 9 in 10.
The IRS has made it clear that this is their preferred method, and 3rd party providers have also made direct deposit their solution. That 1 in 10 filers is not on direct deposit also may point to a sizeable population who lacks access to traditional banking services.
Given that payments are made via direct deposit, the taxpayer has sooner access to the cash of their refund. This also means that there is less opportunity for fraudulent diversion or theft of funds resulting from mail or check theft, or loss of the paper check. Taxpayers still face challenges with diversion through fraudulent filings by others. Still, the taxpayer receives their money faster than in prior years allowing them to utilize those funds sooner.
This may represent an area of opportunity for those enforcing judgments and it is recommended that you conduct asset locates or otherwise be prepared to enforce bank levies during tax season. Being ready to enforce, is the key part to capture owed funds before they are utilized elsewhere.
Next week we will talk about Disruptions to the timing of these payments and their impact.
Damon W. Edmondson
Chief of Analytics, Flock Specialty Finance