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Use Direct Deposit for Your Tax Refund

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  • Use Direct Deposit for Your Tax Refund

    When it comes to taxes, the U.S. government stays current. Although this is debatable in regard to other matters, it's true in this sense.

    Once upon a time, after filing your tax return, you had to wait to receive your money through snail mail - a.k.a. USPS. God knows we love our packages, post-cards and holiday mail, but, when it comes to receiving our hard-earned money, services rendered by the government's postal service simply don't cut it. We want our money now. We want it today. And thanks to the direct deposit service offered by the IRS, we can receive our tax refund sooner than later.

    After your tax return is submitted, it takes 21 days or less for your return to be processed. "Processed" is the keyword here because people often expect to receive their money in 21 days or less. (Which they can, if they take the right steps.)

    These steps are easy, too. They simply involve supplying the IRS with a voided check and bank account number(s) before filing your refund. In addition to being easy, there are also some advantages to setting up direct deposit with the IRS. The first is...

    Speedy Delivery: Actually 3 Weeks or Less

    In addition to being processed in 3 weeks or less, you can actually receive your returns in this amount of time with direct deposit.

    Unlike regular mail, direct deposit is lightning fast. After the funds are accepted by the IRS, the IRS doesn't have to transfer your funds onto a paper check, package the check, stamp the envelope and send it. Funds are transferred with a click of a button to one or more bank accounts of your choice (see below).

    With direct deposit, you don't have to wait eagerly by your mailbox for that money you worked your behind off for last year. You just have to wait for that glorious notification on your smartphone: "Deposit Received by IRS." Your smartphone's set up to your bank account, right?

    Split Your Return Between Multiple Accounts

    Whether you're e-filing or filing by hand, this process is easy. If you're e-filing, the software or online service you're using will simply ask you if you want to split your direct deposit between multiple accounts. After selecting yes, it's just a matter of filling out the fields. If you're filing long hand with paper forms, the IRS conveniently supplies the necessary document to allocate funds accordingly. This document, called Form 8888, allows you to deposit funds into 2-3 banks accounts. You can also purchase U.S. Series saving bonds with a portion of your refund and allocate the rest to various accounts. The choice is yours and the options are endless!

    Buy U.S. Series Saving Bonds and Deposit into Multiple Accounts

    In 2012, 54,000 financially savvy U.S. taxpayers took advantage of the government's savings bond option. More than $21.5 million was invested in these bonds and they are proven to put money from your tax refund to good use. According to the IRS, these bonds are "low-risk bonds that grow in value for up to 30 years. While you own them they earn interest and protect you from inflation."

    How does this relate to direct deposit? Well, you're allowed to invest up to $5,000 of your tax refund in bonds. If your refund is greater than this and you want to invest the maximum amount, you can use direct deposit to allocate your remaining funds to one or more accounts. If your refund is less than $5,000, that's okay! You can still invest a portion of your refund in bonds and use direct deposit to place money in your preferred spending/saving accounts.

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