For millions of tax filers in the United States, income tax refund is a small reward for a year’s hard work. The IRS (Internal Revenue Service) allows taxpayers to receive their federal income tax refund the way they prefer — whether it is in the form of a paper check or through direct deposit. But did you know that you can now receive your refund in not just one but two or three different accounts? This is called a ‘split refund’.
Let’s understand what a split refund is, how to get it and what are its benefits.
Paper check vs. direct deposit: Which method is better?
Most taxpayers still opt for paper checks, but there are several drawbacks to it. Because it takes time to prepare a check and send it through the mail, your refund may be delayed. There’s also the possibility of natural disasters, theft or loss.
Direct deposit is a faster, safer and easier method. If you filed your taxes electronically, direct deposit can get you your refund in as little as 21 days — and sometimes as little as 8 days.
What is a split refund?
Split refund means you can split your tax refund into more than one account. The IRS allows you to have your refund deposited into two or three different accounts. These accounts can be at the same bank or at different financial institutions.
You don’t need to visit an IRS office to take advantage of this feature. You can do the process entirely online — through IRS Free File or another authorized tax software.
Importance of Form 8888
If you want to split your refund into two or three parts, then for this you have to fill Form 8888 (Allocation of Refund Including Savings Bond Purchases). This form determines how much amount of your money should go to which accounts.
The IRS says that each account you are using for split refund should have at least one dollar amount. Sending less than this amount will not be valid.
Major benefits of split refund
1. Saving time in the future
With split refund, you do not have to go through the hassle of transferring your money from one account to another. The part of the tax refund will go directly to the account where you need it.
2. Smart Saving
Many taxpayers choose to have a portion of their refund transferred directly to a savings account to save for the future, while the rest goes into a checking account to cover current needs.
3. Fast and Secure
Direct deposit is not only faster than paper checks, but also more secure, with no risk of loss or theft.
4. Link to a prepaid card or mobile wallet
The IRS also allows you to receive your tax refund on a reloadable prepaid card or account linked to a mobile app. All you need to do is provide the routing number and account number of that account.
Making the split refund process easier
Getting a split refund is as easy as saying “A B C.” You can do all this from the comfort of your home through the IRS website or authorized tax software. About 80% of taxpayers opt for direct deposit, and now that features like split refund are available, even more people can take advantage of it.
Is there a minimum amount requirement?
Many people wonder if there is a minimum amount required to split a refund? The answer is yes, but very little. According to the IRS, each account must have a minimum deposit of \$1. This means that whether your refund is small or large, you can split it into 2 or 3 parts, as long as each part has an amount greater than one dollar.
Conclusion
The IRS split refund facility is a powerful and flexible option for taxpayers. It not only ensures the safety of your money but also improves your financial planning. Getting a one-time refund and getting it transferred directly to the desired account saves both time and energy. So, if you were waiting for a paper cheque till now, now is the time to adopt a digital and smart option.
FAQs
Q1. What is a split refund?
A1. A split refund allows taxpayers to divide their tax refund into two or three separate bank accounts.
Q2. Can I split my refund into more than one account?
A2. Yes, the IRS allows you to split your refund into up to three accounts using Form 8888.
Q3. Is there a minimum amount for each account in a split refund?
A3. Yes, each account must receive at least $1 of the refund.
Q4. How can I apply for a split refund?
A4. You can apply through IRS Free File or other tax software by filling out Form 8888.
Q5. What are the benefits of splitting a tax refund?
A5. Benefits include easier saving, faster access to funds, and eliminating the need to transfer money manually later.
