A:

If you receive a refund when you file your tax return, the main benefit of splitting it is convenience. You can have your refund directly deposited to up to three bank accounts with any U.S. financial institution that accepts electronic deposits (which don’t have to be at the same bank). Suppose your tax refund is $3,000. Here are some examples of how you could split your tax refund:

  • $1,000 directly deposited to your checking account, $1,000 directly deposited to your savings account, and $1,000 directly deposited to your Roth IRA account
  • $2,000 directly deposited to your savings account and $1,000 directly deposited to your Treasury Direct online account where you can use the money to buy U.S. government securities
  • $2,500 directly deposited to your checking account and $500 to purchase I Bonds for your spouse
  • $750 as a check and $2,250 to purchase I Bonds for yourself

In addition to convenience, there could be a psychological and financial benefit to splitting your refund. If you are someone who tends to spend whatever is in your checking account and you need some, but not all, of your refund money to meet your basic living expenses, splitting your refund so that some of it is deposited automatically in your savings account can help you manage your money better. If the financial institution where you have your IRA accepts direct deposits to your IRA account, doing a split refund could also benefit you by encouraging you to invest part of your refund for retirement.

You must weigh the convenience of having the IRS split your refund against the hassle of filling out additional paperwork (IRS Form 8888, Allocation of Refund) and the potential security risk of sharing additional bank account information on your tax return. It might be simpler or safer to have your refund deposited to a single account and then allocate the funds yourself.

RELATED FAQS
  1. How do I get a split tax refund?

    You don't have to receive your tax refund in a lump sum. Learn the options you have for splitting the money the IRS owes ... Read Answer >>
  2. When should my tax refund arrive?

    Read about how long it takes the IRS to process your income tax return and what factors could delay receiving your tax refund. Read Answer >>
  3. Can the IRS withhold your tax refund?

    Learn about the instances in which the IRS can levy your federal and state income tax refunds, and find out how the levy ... Read Answer >>
  4. What proportion of my income should I put into my demand deposit account?

    Find out how much money to keep in your liquid demand deposit accounts, such as checking or savings accounts, and discover ... Read Answer >>
Related Articles
  1. Taxes

    IRS Refund Lost? Here's What to Do

    Don't panic. There are a number of reasons your refund might be delayed – and solutions for each.
  2. Taxes

    5 Ways To Receive Your Tax Refund

    Taxpayers in the U.S. can receive their income tax refund in many different forms - checks, debit cards, savings bonds and direct deposits. Find out which one is right for you.
  3. Retirement

    5 Top Tax Season Questions

    A tax pro answers questions she hears most often and quashes some myths.
  4. Taxes

    5 Ways To Double Your Tax Refund

    Many companies offer incentives that allow you to multiply your tax refund - at a price. Here are five of the more popular promotions this year.
  5. Taxes

    Top 6 Reasons You Could Face a Tax Refund Delay

    Several factors could lead to a tax refund delay, such as having errors in your filing or claiming certain credits that are favored by the cheats.
  6. Taxes

    12 Reasons Your IRS Refund Was Late

    A tax refund can be a nice post-tax reward, but if it's taking too long to arrive, here are the most likely reasons for the hold-up and how to check on it.
  7. Investing

    3 Ways to Invest Your Tax Refund

    Investing your tax refund is a smart way to reach your financial goals. But depending on what you want to achieve, investment styles may differ.
  8. Taxes

    5 Smart Ways To Use Your Tax Return

    This year, find out how to stretch your tax refund further to strengthen your future.
  9. Taxes

    Refund Anticipation Loans Generally A Ripoff

    These short-term loans can provide much-needed cash, but the instant payout comes at a cost.
  10. Taxes

    Avoid The Prepaid Tax Refund Debit Cards

    Here are reasons why you shouldn't get a prepaid card from TurboTax, Jackson Hewitt, TaxAct or H&R Block.
RELATED TERMS
  1. Refund

    A payment from the government for an individual's overpaid taxes. ...
  2. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household ...
  3. Direct Deposit

    Electronic funds that are deposited directly into your bank account ...
  4. Tax Refund Anticipation Loan - RAL

    A loan provided by a third party against a taxpayer's expected ...
  5. Crossover Refunding

    A local government's issuance of new municipal bonds (called ...
  6. Intaxification

    The feeling of satisfaction and joy that a tax refund creates ...
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center