Some good news from the IRS today. Beginning January 2007, if you are getting a tax refund, you can designate the tax refund to go into up to three different accounts. Previously you could only designate a single savings or checking account to have the entire refund deposited into. This meant that if you wanted to place part of the refund into another savings account and also some into retirement, you had to do so yourself after the IRS deposit arrived. While many have good intentions, if you’re like the average person, even if you considered placing some into other accounts, you probably didn’t once the refund arrived in your designated account. The new rules allowing you to make the direct deposits into three different accounts means that you can take a never seen, never missed approach with your tax refund in the future:
The IRS will create a new form, Form 8888, which will give taxpayers greater control over their refunds. Form 8888 will give taxpayers a choice of selecting one, two or three accounts such as checking, savings and retirement account. Taxpayers who want all their refund deposited directly into one account can still use the appropriate line on the Form 1040 series…
The split-refund program will allow taxpayers to conveniently designate – at the time they file – and deposit their refunds with any U.S. financial institution as long as they provide valid routing and account numbers. Taxpayers will attach a new Form 8888 to their returns indicating amounts for each allocation and providing account information.
Of course, if you receive a tax refund, it means you’re giving an interest free loan to the government and you may want to change your withholding numbers to better reflect the amount in taxes you should be paying.