With the tax deadline just around the corner, the Internal Revenue Service reminds taxpayers that making an electronic direct deposit of their refund into a bank or other account is the fastest way to get their money. A taxpayer can deposit their refund into one, two or even three accounts to help with retirement or savings.
Eight out of 10 taxpayers get their refunds by using direct deposit. It is simple, safe and secure. The IRS uses the same electronic transfer system to deposit tax refunds that is used by other federal agencies to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts. Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable.
Direct deposit is easy to use. A taxpayer simply selects it as the refund method when using tax software or working with a tax preparer, and then types in their account and routing number. It’s important to double check entries to avoid errors.
Direct deposit also saves taxpayer money. It costs the more than $1 for every paper refund check issued, but only a dime for each direct deposit made.
By using direct deposit, a taxpayer can split their refund into up to three financial accounts, including a bank or Individual Retirement Account. Part of the refund can even be used to purchase up to $5,000 in U.S. Series I Savings Bonds.
A taxpayer can split their refund by using tax software or by using IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), if they file a paper return. If a taxpayer wants the IRS to deposit their refund into just one account, they simply use the direct deposit line on their tax form. Some people use split refunds as a convenient option for managing their money, sending some of their refund to an account for immediate use and some for future savings.
The IRS reminds taxpayers they should only deposit refunds directly into accounts that are in their name, their spouse’s name or both if it’s a joint account. No more than three electronic tax refunds can be deposited into a single financial account or prepaid debit card. Taxpayers who exceed the limit will receive an IRS notice and a paper refund will be issued for the refunds exceeding that limit.
E-file plus direct deposit yields fastest refunds
The IRS also encourages taxpayers to file electronically. While a person can choose direct deposit whether they file their taxes on paper or electronically, a taxpayer who e-files will typically see their refund in less than 21 days. Taxpayers can track their refund using “Where’s My Refund?” on IRS.gov or by downloading the IRS2Go Mobile App.
“Where’s My Refund?” is updated once daily, usually overnight, so there’s no reason to check more than once per day or call the IRS to get information about a refund. Taxpayers can check “Where’s My Refund?” within 24 hours after the IRS has received their e-filed return or four weeks after receipt of a mailed paper return. “Where’s My Refund?” has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved, and (3) Refund Sent.
Whether through IRS Free File or commercially available software, electronic filing vastly reduces tax return errors, as the tax software does the calculations, flags common errors and prompts taxpayers for missing information.
Other last-minute tips from IRS:
Need more time to file? Avoid a late-filing penalty by requesting an extension of time to file. There are several ways to do so, including through the Free File link on IRS.gov or by making an electronic payment and designating it as an extension payment. An extension of time to file is not an extension to pay. Taxpayers can file up to six months later when they have an extension, but their taxes are still due by the original due date. They can get an automatic extension of time to file when making a full or partial payment with Direct Pay, the Electronic Federal Tax Payment System or by debit or credit card.
When paying electronically, taxpayers must select Form 4868 as the payment type and the payment date to get the automatic extension, and there’s no need to file a paper or electronic Form 4868. Keep the confirmation as proof of the payment and extension. With Direct Pay and EFTPS taxpayers can opt in to receive email notifications about their payment.
Taxpayers can file Form 4868, Application for Extension of Time To File U.S. Income Tax Return, electronically or by mail. April 17 is the deadline for most to pay taxes owed and avoid penalty and interest charges.
Watch out for email schemes.Taxpayers will only receive an email from Direct Pay or EFTPS if they’ve opted in for email notifications when they initiate the payment process in Direct Pay or sign up for email notifications through EFTPS. Report all unsolicited email claiming to be from the IRS or an IRS-related function to email@example.com.
Owe tax? Taxpayers who owe taxes can use IRS Direct Pay or any of several other electronic payment options. They are secure and easy and taxpayers receive immediate confirmation of their payment. Or, mail a check or money order made payable to the “United States Treasury” along with a Form 1040-V, Payment Voucher. Taxpayers who can’t pay by April 17 often qualify to set up a monthly payment agreement with the IRS using the Online Payment Agreement option on IRS.gov.
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