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.

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