Feature Articles: Taxes
Splitting your refund among multiple accounts
Reviewed and adapted with special permission from the IRS by: Andrew Zumwalt, extension associate, Personal Financial Planning, University of Missouri Extension
Taxpayers now have more choices and flexibility for the direct deposit of federal income tax refunds. Refunds can be split among up to three accounts held by as many as three different U.S. financial institutions, such as banks, mutual funds, brokerage firms, or credit unions.
This split-refund option is available to taxpayers who choose direct deposit regardless of whether the original returns are filed on paper or in electronic format using Form 1040, 1040A, 1040EZ, 1040-PR, 1040NR, 1040NR-EZ or 1040-SS. However, taxpayers filing Form 8379, Injured Spouse Allocation, cannot opt to split their refund.
To split your direct-deposit refund among two or three different accounts or financial institutions, you should complete Form 8888, Direct Deposit of Refund to More Than One Account. If you file Form 8888, you cannot choose to get any part of your refund as a check. If you want your refund sent electronically to just one account then you can continue to use the direct deposit line on Form 1040.
Opportunity for Asset Building
Split refunds offer the opportunity to build assets by sending part of your refund to one account for immediate needs and another part to a savings or investment account for future needs. The IRS repeatedly has encouraged taxpayers to adjust their payroll withholding to ensure they pay only the taxes required. However, some people appear to view payroll withholding as a way to save money.
A study, “Refunds to Assets: Splitting Refunds and Building
Assets,” conducted by Harvard Business School and other interested
parties, found that one in three lower-income taxpayers who were
offered a choice opted to direct a portion of their refund into
savings accounts. For many, it was their first savings experience
with a financial institution.
For more information, contact your local county Extension office
or call the IRS at 1-800-829-1040.
- Form 8888: Direct Deposit of Refund to More Than One Account
- Frequently Asked Questions about Splitting Federal Income Tax Refunds
IRS FACT SHEET: FS-2007-05
Last update: Monday, March 29, 2010