fast approaching, starting Monday, January 24. And even if you don’t plan to file before the April 18 deadline — or after if you’re filing for an extension — you should consider setting up a direct deposit with the IRS. Not only can this help you get your tax refund much faster, but it will also help you get any other money you are owed (for example, child tax credit money) faster.
Most people use direct deposit as a payment method to receive tax refunds, child tax credits, and stimulus checks. Some groups, such as Social Security beneficiaries, are even required by the US Treasury to use direct deposit.
Here’s why and how to set up direct deposit with the IRS. For more details, here’s what you need to know about. Also, here .
You could get your tax refund weeks earlier using direct deposit
When you file your taxes, you usually have the option of adding a bank account to receive your refund by 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 deposit your money in up to three different accounts if you want to split your tax refund.
You can also expect a faster refund if you combine direct deposit with e-filing, rather than printing and mailing paper tax returns. In fact, the IRS recommends setting up direct deposit to avoid any delays in your refund. Last year, the average time it took to collect tax refunds for those who filed electronically with direct deposit was 21 days, not including those who had problems with their tax returns.
You should also be aware that the IRS asks taxpayers to avoid filing paper returns, if possible, and instead file them electronically. Filing your return the old-fashioned way could lead to another processing delay, like the one the IRS experienced last year. Filing your tax return closer to the start of tax season rather than closer to the deadline will also allow you to get your tax return faster – along with any unpaid child tax credits.
You’ll also get your Child Tax Credit faster.
Overall, people who had set up direct deposit with the IRS received all of their child tax credit payments much sooner than those who received paper checks. This means you’ll want to set up your direct deposit information as soon as possible if you want the rest of your child tax credit money to go faster. To do this, you will need to enter your banking information when youThis year.
And if you’re still waiting for the third stimulus check to arrive, or an increased payment, you’ll receive it faster if you’ve set up direct deposit.
Fun fact: it’s cheaper for the Treasury to send your reimbursement by direct deposit, rather than by paper check
Each paper refund check issued costs U.S. taxpayers more than $1, but it only costs a penny for each direct deposit made, according to the IRS. In 2020, 125.3 million refunds were issued, including more than 23 million sent by post, according to Bankrate.
This means that in 2020, it costs taxpayers about $23.3 million to send paper check refunds and about $10.2 million for direct deposit.
Errors to fix now
If you never updated your bank details on the IRS Child Tax Credit portal, you may not have received your money or it may have come as a paper check. . To avoid this in the future, you can adjust these direct deposit details in the portal or when you file your taxes online.
Also, if you want your tax refund split across multiple accounts, now is the time to do it. When you set up direct deposit for your taxes, you can add up to three different bank accounts, which can be beneficial if you’re using one as a savings account.
How to set up your direct deposit banking information when you file your tax return
When filing income tax, select Direct deposit as a method of reimbursement via your bank account and routing numbers. You can still add your bank details even if you don’t get a refund. You can find your account and routing number on your bank’s website when you log in, call your bank branch, or locate the numbers on a check. You can also provide this information to your tax preparer if you do not file your own returns., then enter your
If you are a, but you are claiming the recovery rebate credit to get a missing stimulus check, you will need to complete Form 1040 or Form 1040-SR (PDF).
The IRS says your refund should only be deposited directly into a US bank or account affiliated with a US bank, and must be in your name, your spouse’s name, or both if it is of a joint account.