As tax season approaches, there are many decisions to make that will impact how quickly you can receive your tax return. One of the most important, and often overlooked factors, is deciding how you want to get paid when filing your taxes – pay by check or direct deposit?
While a lot of people opt for the traditional paper check route, there are numerous reasons why selecting direct deposit is much more beneficial. Here are the top three reasons why:
1. It’s fast.
Is your refund earmarked to pay off business debt or to grow your business? Most refunds are issued in less than 21 days for taxpayers who filed electronically and chose direct deposit. Paper checks can take twice as long, and direct deposits can’t get lost in the mail.
2. It provides options.
One of the biggest benefits of direct deposit is that your refund can be split into several financial accounts. These include checking, savings, health, education, and certain retirement accounts.
Use IRS Form 8888, Allocation of Refund, Including Savings Bond Purchases to deposit a refund in up to three accounts. This form cannot be used to designate part of a refund to pay tax preparers.
By incorporating a variety of financial accounts among your tax refund, you can better budget and manage funds. This flexibility is paramount for properly regulating finances and taking advantage of opportunities that can make financial management more accessible.
3. It’s more secure
Since refunds are electronically deposited, there’s no risk of having a paper check stolen or lost in the mail.
Also, digital transactions are immediately encrypted and stored securely, meaning your sensitive financial information is protected from any potential tampering or loss.
“There’s no chance of it going uncashed, getting lost, stolen, or destroyed,” the IRS said, noting it’s the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.
Direct deposit is fast, secure, easy, and flexible. Whether you receive a paper check or direct deposit into a single account or three accounts, you can use the “Where’s My Refund?” feature on the IRS website or call 800-829-1954.
You can check the status of your 2022 income tax refund 24 hours after e-filing or after six months or more if you filed by paper. You’ll need your Social Security or taxpayer ID number, filing status, and exact refund amount on your return. Information is updated once a day, overnight.