5 Reasons to Choose Direct Deposit of Tax Refunds by Dustin Grizzle, CPA
Posted on February 14, 2017 by Dustin Grizzle
The 2016 tax filing season officially opened on Jan. 23, 2017, with a warning from the IRS that taxpayers should be prepared to wait longer than usual to receive expected refunds. The processing delays are due to enhanced efforts by the agency to catch potential fraud and identify theft. As a result, the IRS advises taxpayers to choose to receive refunds via direct deposit. Following are just five reasons why.
- It’s Fast. The quickest ways for taxpayers to receive a refund is to electronically file their federal tax returns (e-file) and elect direct deposit, even when returns are filed on paper.
- It’s Secure. Refunds are transferred directly into the bank accounts that taxpayers identify as their own. Conversely, taxpayers may receive paper checks via postal mail, which increases the likelihood that refunds may get lost in the mail or stolen from an individual’s mailbox.
- It’s Convenient. Taxpayers will not need to wait for a refund check to be delivered to their mailboxes or make extra trips to the bank to deposit the money into financial accounts.
- It’s Easy. After choosing direct deposit, all taxpayers need to do is enter their correct bank account and routing numbers or provide those details to their tax accountants.
- It’s Flexible. Direct deposit allows taxpayers to “split refunds” and allocate dollar amounts into different financial accounts, including bank checking and savings accounts, college savings accounts, health savings accounts and certain retirement accounts. The only caveat is that the IRS limits direct deposit refunds to no more than three into a single financial account during a tax year.
Whether taxpayers choose to file their annual federal returns or receive refunds on paper or electronically, it is important that they keep and maintain copies for a minimum of seven years.
About the Author: Dustin Grizzle is a senior manager in Berkowitz Pollack Brant’s Tax Services practice, where he provides tax planning and compliance services to businesses and high-net-worth individuals. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at firstname.lastname@example.org.