Direct deposit options include deposit into your savings, checking, retirement account or split refunds into two or three accounts and new in 2010 to purchase Treasury / Savings Bonds.
Tax Refund Direct Deposit
Using direct deposit of your tax refund ias simple. You just enter your account number and your nine digit ACH/Routing number into your tax return.
Direct deposit is safer, because the money goes directly into your account so no lost checks. The direct deposit usually means you will get your refund a week sooner as well, in some cases in as little as ten days.
Splitting Tax Refunds
You may want to split your refund into two or three different accounts. As an example you may want some of your refund to go into savings, some into your checking and some into a retirement fund. Other examples of financial accounts eligible to receive deposits include health savings accounts and Coverdell education savings accounts.
Some prepaid Visa accounts will also let you make a direct deposit into them, check with your account holder to see if this is possible.
Splitting a refund requires tax Form 8888, Direct Deposit of Refund to More Than One Account, to split a tax refund into two or three financial accounts. The form provides instructions.
Buying Savings Bonds with Tax Refunds – Form 8888
New in 2010 is the ability to use your tax refund to buy up to $5,000 in low-risk, liquid Treasury Bonds, which earn interest and protect owners against inflation.
The purchased bonds will be issued in the taxpayer’s name. If the refund is a joint refund, the bonds will be issued in the names of both taxpayers. No beneficiary may be selected. The taxpayer need not have a Treasury Direct account to purchase Bonds using this option.
Using Form 8888, the taxpayer enters 043736881 as the routing number and checks the “savings” box. He must use the letters “BONDS” as the account number.
An I Bond request must be a multiple of $50. The taxpayer also needs to designate an account to which he wants the IRS to deposit the balance of his refund. For example, if his refund is $280, the taxpayer can request that $250 be used to purchase I Bonds and that the remaining $30 be deposited into a checking, savings or investment account.
In cases where a refund is an exact multiple of $50 but less than $5,000, the taxpayer may direct that all of the refund be applied to I Bond purchases by filling out the direct deposit information on his tax return and simply not using Form 8888.
The savings bonds will be mailed to the taxpayer.
Bonds will not be purchased in situations where the taxpayer makes an error figuring his refund, or if the bond request is not a multiple of $50 or the refund is offset for any reason. In these cases, the requested purchase will be cancelled and the entire refund mailed to the taxpayer in the form of a check.
Once the IRS has processed a tax return and placed an order for I Bonds, the taxpayer can inquire about the status of his bond purchase by calling the Treasury Retail Securities Site at 1-800-245-2804.
Individual Retirement Arrangements and Tax Refunds
Refunds may be deposited directly into previously established traditional IRAs, Roth IRAs and SEP-IRAs. (They may not be deposited into SIMPLE IRAs.)
The taxpayer should check with his financial institution to confirm that it accepts direct deposits as well as inform the trustee of the tax year to which the IRA should be contributed. For example, if a taxpayer intends for a direct deposit to be designated as a 2009 IRA contribution but fails to inform the trustee, the deposit might be designated as a 2010 contribution. The direct deposit contribution to an IRA must be made prior to April 15 in order to apply to the 2010 tax year.