The only reason that you really should have a paper tax refund check mailed to you is if you do not have a bank account. Some non-banking institutions do allow tax refunds to be deposited in them. If you do not have a traditional bank, inquire with your prepaid card company. Services charge fees to cash checks, which means that you will not have your entire refund available. Direct deposit is a much better option for receiving your tax refund.
Quicker Reception of Funds
When you file your taxes online and select direct deposit, the average turnaround time for tax return approval and the scheduling of your deposit is roughly 14 business days. Filing via mail and waiting for a paper check can take 2 months or more.
You can easily track your refund status on the IRS website. This will tell you when you can expect your tax refund to be deposited into your bank account. If you are able to file in February, you are likely to have your refund deposited within 14 days.
Splitting the Funds
When you select direct deposit, you can delegate a specific amount of funds to go to a specific account. You have the option of breaking up your refund into multiple deposits.
Account types accepted for separated payments includes:
- Savings accounts
- Retirement accounts
- Education funds
- Healthcare accounts
- Multiple checking accounts
If you have student loan debt, depositing some of the funds into a school/education-related account is ideal. When depositing into a retirement account, be sure to track the amount deposited each year to keep a balance of the monies added from tax refunds.
Limits are in place for this option. Taxpayers are limited to 3 transactions, allowing you do disperse funds from your tax refund into 3 separate accounts.
Safer and Convenient
It really is safer to have your funds direct deposited from the federal government. These transfers are secure. Your personal banking information is kept safe. While the U.S. Postal Service is thought to be efficient, that is not always the case. Mail does get lost, and a paper check may end up at someone else’s home. This delays you in having access to your tax refund.
It is also more convenient. It saves you a trip to the bank or having to really pay attention to the mail.
Saves the Taxpayers Money
Every time the federal government cuts a check for a tax refund, it costs the American taxpayers just over $1. Sending payments electronically costs only a dime. Saving taxpayer dollars does help the government’s finances a bit.
Once you see your direct deposit available, it is up to you to decide whether to move it around, invest it or start a savings with it. You can also watch the entire transaction using the Internet to ensure that the deposit is received, that it is correct and that it clears quickly. Paper checks, even though they are from the IRS, can still take days to clear in your banking institution’s system.