Match-Making For Savers

Indeed, tax refunds today cannot be easily split. The Internal Revenue Service at this point sends refunds as a single payment, so a taxpayer who wants to save part and keep part to spend has to do that division himself.

But -- and this is the other item that could help retirement saving in the long run -- the IRS said recently it plans to offer taxpayers the ability to split their refunds and have part sent one place and part to another, beginning in the 2007 filing season, which would be for next year's taxes. The agency said, though, that it is still ironing out details of how a split would operate.

"It's particularly important that the system of split refunds work with IRAs because those are the individual accounts we now have," said J. Mark Iwry, former benefits tax counsel at the Treasury Department and nonresident senior fellow at Brookings.

With more than 100 million households claiming refunds averaging more than $2,000 each, the ability to direct a portion to IRA savings could have an important long-term impact on retirement saving, Iwry said.

The combination of the Block experiment and split refunds suggests ways to boost retirement saving among lower-income workers.

Obviously, H&R Block isn't going to pony up for matches outside this experiment, but the Saver's Credit does provide a precedent for government to take a role. Perhaps restructuring and expanding that credit and matching it up with split refunds and IRAs could help produce what various tax-favored accounts so far have not: a reasonable chance for a secure retirement.

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The Justice Department asked a federal court in Baltimore on Friday to bar John Baptist Kotmair Jr. of Westminster, Md., and his organization, "Save-a-Patriot Fellowship," from selling what the government claims are tax-fraud schemes. The department also wants the court to order Kotmair and Save-a-Patriot to turn over their customers' names, mailing and e-mail addresses, and telephone and Social Security numbers.

The government charges that Kotmair, Save-a-Patriot and a Save-a-Patriot division called the National Workers Rights Committee tell their customers - whom they charge upwards of $99 a year - that they are not required to pay federal taxes or file federal tax returns. Such arguments repeatedly have been rejected by courts across the country, the government said.