The Internal Revenue Service closed out the week by reminding taxpayers that receiving a tax refund by direct deposit is faster and more flexible than traditional paper checks, even for those who do not currently have a bank account. To help convince the remaining 20 percent of taxpayers to make the jump to direct deposit, the IRS emphasizes that it’s easy to set up and—perhaps more importantly—free of charge.
How do I set up direct deposit for my tax refund?
Getting a tax refund issued by direct deposit is straightforward. Taxpayers only need to tell their paid tax return preparer or select the direct-deposit option when using a do-it-yourself tax preparation software, then provide their routing number and account number listed on the checks associated with their bank account. Those who don’t know where to find that information can generally find it on a paper check tied to their bank account, by logging into their bank account online, or in a mobile banking application.
The IRS also lists three other ways to get direct deposit-capable routing and account numbers:
- Online bank accounts
- Mobile banking applications
- Certain prepaid debit cards
The agency notes that taxpayers who don’t have a bank account can use the Federal Deposit Insurance Corporation (FDIC) or, if a veteran, the Veterans Benefits Banking Program (VBBP) to create an account.
Choosing direct deposit gives taxpayers options for their tax refund
Aside from getting a tax refund much faster, the IRS says that choosing direct deposit gives taxpayers flexibility in how they receive their money.
“A taxpayer can split their refund by using tax software or by using Form 8888, Allocation of Refund (including Savings Bond Purchases), if they file a paper return,” the IRS explains. “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.”
What’s the easiest way to track a tax refund?
The IRS created the “Where’s My Refund?” online tool to help taxpayers conveniently track the status of their tax return, which provides daily updates about what the agency calls the “three stages” of filing a return:
- Return Received,
- Refund Approved, and
- Refund Sent.
Taxpayers can learn more about direct deposits by watching this IRS YouTube video: https://www.youtube.com/watch?v=2mfpKTx-5nE
Source: IR-2021-19
The Tax Place