IRS Makes Depositing Tax Refunds Easier

The Internal Revenue Service has made it easier for consumers to electronically deposit tax refunds into checking and savings accounts, potentially providing banks with an inexpensive, dependable source of funds.

Last year, more than 10.4 million people received almost $13 billion in refunds via the agency's year-old direct-deposit program, according to IRS figures. That's still just a sliver of the nearly $100 billion that was refunded to 80 million filers last year.

But more tax refunds may be deposited electronically this year. That's because the IRS has a new, simple section right on the main tax return for consumers who want their refunds deposited electronically. Gone is Form 8888, completed by filers who wanted their refunds deposited directly last year.

What's more, the IRS is actively pushing direct deposit as a faster, more secure way to get refunds. People who ask for direct deposit will get their refunds three weeks sooner than those who receive a check, the IRS said.

"There's no check to get lost, it's more convenient, no trip to the bank to deposit your check," the tax-form instruction booklet states. Direct deposit also saves tax dollars. "A refund by direct deposit costs less than a check," the IRS notes.

To help banks spread the word, the American Bankers Association has sent out more than three million statement-stuffer brochures, informing customers how to take advantage of direct deposit.

"The direct-deposit option has generated a significant amount of interest throughout the banking community," said Edward F. Smith, publisher of the ABA publication, Bankers News.

Mr. Smith said there are pitfalls. For example, refunds issued to people filing jointly must be deposited in a jointly owned account. "One bank got caught in the middle of a divorce case because the refund was deposited into the wrong account," he said.

Taxpayers may have their refunds electronically deposited into the account of their choice by filling in their account number and their financial institution's routing number.

Ms. Needham writes for the Medill News Service.

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