Back in the day, I vividly recall running to the mail box to look for our tax refund. It was as if I’d found free money, even though I knew of course that it was just the IRS returning my own money to me. Still, tax refund day made me feel like I had won the lottery.
While you can still request your refund via check, it’s the slowest way to get your money. A paper check refund will typically take six to eight weeks, according to the IRS. There are, however, much faster ways to get your tax refund. Here are six of them.
1. Direct Deposit – This is exactly what it sounds like. The government will directly deposit your tax refund into your checking account. I prefer this method not only because it’s paperless, but also because I receive my tax refund quickly—typically less than three weeks. The IRS will also split the amount into as many as three accounts if you prefer. The account types are not limited to simply checking and savings. Some of the other accounts where you can receive your refund include:
- Independent Retirement Account
- Health Savings Account
- Brokerage Account
- Coverdell Education Savings Account
- Archer Medical Savings Accounts
The account you designate to receive the refund must be a U.S. financial institution. Be sure to double-check your bank account number and routing number. If you make a mistake and the government sends your money to the wrong place, banking laws that are meant to protect you can cause you a major headache in retrieving those lost funds. IRS Form 8888 is where you designate the accounts to receive the direct deposit.
2. Tax Credit – You can have your refund credited toward your tax bill for the following year. For those who don’t pay estimated taxes, this is not the best option. Why let the IRS hold on to your cash when you can at least put it into a bank account? But if you pay estimated taxes, you can simply apply any refund to the estimated taxes you’ll be paying in April anyway.
3. Series I Savings Bond – This is an interesting option that doesn’t receive a lot of attention. Instead of receiving a check or direct deposit, you can fill out Form 8888 and buy up to $5,000 in Series I savings bond with your tax refund. These bonds are low-risk, earn interest, and protect against inflation. The bonds must be bought in $50 increments. If your refund falls outside of these $50 increments, the IRS will deposit the remainder in a bank account that you designate. For instance, if you receive a $525 tax refund, the IRS will mail you a $500 Series I savings bond and deposit $25 directly into your bank account.
4. Retail Bonus – A retail bonus does not refer specifically to how you receive your tax refund, but it functions the same way by providing you bonus cash equal to your anticipated tax refund. What you do is walk into a retail store—maybe a home appliance store, furniture store or car dealership—with your tax return in hand. They provide you credit based on how much the government is likely to give you as a tax refund. If you pursue this avenue, be careful because you have to sign a contract that can often be filled with hidden or complex fees.
5. Refund Anticipation Loan – This is a tax refund option that I hesitate to point out because I don’t recommend it. Some companies that help you prepare your taxes will assess how much of a tax refund you are bound to receive. They will then provide you with a check in that amount, minus fees and or a high interest rate for the period of time it takes to receive your IRS refund. This allows you to receive your tax refund cash earlier than normal. A refund anticipation loan, however, can be quite expensive, so you should avoid this option at all cost.
6. Prepaid Debit Card – Loading your IRS tax refund onto a prepaid debit card is somewhat of an old idea, but more and more tax preparation companies are buying into this option. The three most prevalent tax prep options, Turbo Tax, H&R Block and Jackson Hewitt, each offer their own co-branded prepaid card, but all three cards include monthly fees if certain rules are not followed.
But there is an alternative. You don’t have to use a prepaid card offered by a tax preparation company to get your refund. Just about every prepaid card offers this feature. So rather than using a tax preparation card, pick among the best prepaid cards available with low fees for your tax refund.
No matter how you receive your tax refund, getting money back from the government is always nice. But remember that each option has positives and negatives. Give those factors some serious though before making any tax refund decisions.Topics: Taxes