For most people, getting a tax refund may feel like getting a handful of sand. While it feels virtually impossible to hang on to it, you can still have IRS split your refund across different accounts to prevent the windfall from slipping through your fingers. A split fund allows you to divide your repayments in your desirable proportion while depositing the money in up to three different accounts with U.S. financial institutions. Splitting refunds gives you a convenient option to manage your money by sending a part of your money to your checking account for immediate use while depositing the rest in a savings account.
What are the benefits of using split refunds?
Splitting your refunds allows you to effortlessly direct your funds into different accounts to ensure financial accessibility for immediate and future needs. Splitting refunds also offers you the safety and speed of your direct deposit, hence, enabling you to access your money faster than a paper check. Therefore, it eliminates the procedure of depositing your refund into your savings or checking account and later moving part of your money to another account. It also enables you to directly bifurcate your money in up to three different bank accounts while sending your money to the appropriate place the first time itself.
How to split your refund?
One of the practical ways to split your refunds is by following the instructions your tax software provides electronically. However, if you wish to file a paper tax return, you should complete the documentation of Form 8888, Allocation of Refund, including Savings Bonds Purchases, and attach it with your federal income tax return. This will enable you to inform IRS about your preferred ratio of refund deposit in each account.
However, if you wish to undertake the virtual process, the following are some points to remember:
- If you have your account and routing number handy, you can virtually list up to three bank accounts on Form 8888.
- The accounts should be under your or your spouse’s name and/or both and must be able to sustain direct deposits. This is because you can’t ask the IRS to send part of your refund to your grandchildren, friends, or a professional who prepared your taxes.
- If you wish to allocate a part of your refund to an individual retirement account, you should inform your custodian of the tax year for which your contribution is dedicated. This is because you can make IRA contributions for the previous tax year until the April filing deadline.
- Ensure the accuracy of your account details mentioned in the documentation.
- Keep in mind the order of accounts.
Can you send your refund to just one account?
The answer is yes. You can ask IRS to deposit your refunds into just one account or upto three bank accounts. However, if you wish to deposit the whole amount in just one account, then you should use the special direct deposits lines on your tax returns, that is, Forms 1040 and 1040-A. Similarly, if you want to direct your refunds in multiple accounts or if you are willing to buy a savings bond with a part of your return while depositing the remainder in other accounts, you should use Form 8888, Allocation of Refund, including Savings Bond Purchases.
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