Most people use direct deposit as a payment method for receiving tax refunds and incentive checks. The IRS has sent more than 100 million payments throughwith the second incentive check, and according to Benefits.gov, more than 80% of people use a direct deposit to get their tax refund. Some groups, such as are even required by the US Treasury to use direct deposit.
But that doesn’t mean there aren’t any downsides to using direct deposit (see below). That said, the benefits of using direct deposit outweigh the drawbacks you may encounter. While you’re thinking about holding off on filing your taxes, you should know that there are severalHere’s why and how to set up a direct deposit with the IRS.
You can get your tax refund back weeks earlier with a direct deposit instead of a paper check
When you file your tax return, you usually have the option to add a bank account so you can receive your refund via direct deposit. “The best and fastest way to get your tax refund is to have it electronically deposited into your financial account for free,” says the IRS. You can have your money deposited in up to three different accounts if you want to split up your tax refund.
You can also expect a faster refund if you combine direct deposit with electronic filing, instead of printing and emailing paper tax returns. In fact, the IRS expects nine out of 10 taxpayers to receive their refund within 21 days of filing electronically with direct deposit, as long as there are no issues with their tax returns.
Also, keep in mind that the IRS asks the taxpayer not to file paper returns if possible. Filing your return the old-fashioned way can add to the processing delay the IRS is already experiencing due to a backlog of 6.9 million raw paper returns from last year. Filing your tax return closer to the start of the tax season instead of closer to the deadline will also help youalso.
You could also be in the first group to get the next stimulus check faster too
Generally people who hadreceived their first and much sooner than those who did not. Now that one , you want to have your direct deposit data set up as soon as possible. To do this, you must enter your bank details when you enter this year.
Because it is too early to know if new direct deposit registrations are possible for oneYour safest bet is to sign up with the IRS now if you have a the fastest possible way.
Also because stimulus checks are expected while the tax season is still underway,would the , which can have certain benefits. Direct deposit would mean that you might receive the new payment sooner.
Fun fact: it’s cheaper for the Treasury to send your refund via direct deposit, rather than a paper check
Each paper refund check issued costs U.S. taxpayers more than $ 1, but it only costs a dime for each direct deposit, according to the IRS. In 2019, according to Bankrate, 125.3 million repayments were made, of which about 23 million were by mail.
That means that in 2019 it cost taxpayers about $ 23 million to send paper checks and about $ 12.5 million for direct deposit.
You want to fix these errors now
The IRS never allows itor fix any errors in the bank account, forcing this group to claim their missing money as a on their taxes for 2020. But now you will have the opportunity to make those adjustments not to go to the wrong account – such as an account you closed or if you entered your details incorrectly in a previous year.
If you also want to spread your tax refund across multiple accounts, now is the time to do that. When you set up a direct deposit on your taxes, you can add up to three different bank accounts, which can be useful if you’re using one as a savings account.
So, what are the drawbacks of using direct deposit?
When it comes to the delivery of stimulus checks, the second round of checks revealed two problems that affected millions of people (a relatively small percentage of all direct deposit recipients).
Because the IRS has not opened a direct deposit registration through thesomeone who closed or switched bank accounts between the first and second check could not make a correction. If their checks have been returned to the IRS, this group will likely have to claim their payments with the
The second problem to know is that the IRS has sent direct wire transfers to millions of temporary bank accounts used by(These accounts are a typical part of the third party tax preparation process). As a result, there were to this group, as the IRS and the companies tried to untangle the problem. While many people have to claim the stimulus check credit in their taxes, the companies have promised to work with customers to ease the process.
How to set up your direct deposit bank information when you file your tax return
Select when filing taxes Direct Deposit as your refund method through yourand then type in your bank account and routing numbers. You can still add your bank account information even if you don’t receive a refund. You can find your account and routing number on your bank’s website when you sign up, call your bank branch, or find the numbers on a check. You can also provide this information to your tax advisor if you are not filing your own tax return.
If you have a, but you ask To get a missing stimulus check, you must submit Form 1040 or Form 1040-SR (PDF).
The IRS says that your refund should only be deposited directly into a US bank or an affiliated account with a US bank, and it must be in your name, your spouse’s name, or both if it is a joint account.
For more information, herePlus, you could get with one and