The IRS encourages taxpayers to get informed about topics related to filing their federal tax returns in 2022. These topics include special steps related to charitable contributions, economic impact payments and advance child tax credit payments. Taxpayers can visit IRS.gov/getready for online tools, publications and other helpful resources for the filing season.
Here are some key items for taxpayers to know before they file next year.
Changes to the charitable contribution deduction
Taxpayers who don’t itemize deductions may qualify to take a deduction of up to $600 for married taxpayers filing joint returns and up to $300 for all other filers for cash contributions made in 2021 to qualifying organizations.
Check on advance child tax credit payments
Families who received advance payments will need to compare the advance child tax credit payments that they received in 2021 with the amount of the child tax credit that they can properly claim on their 2021 tax return.
• Taxpayers who received less than the amount for which they’re eligible will claim a credit for the remaining amount of child tax credit on their 2021 tax return.
• Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the child tax credit when they file a 2021 federal income tax return next year. This includes families who don’t normally need to file a return.
In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021. People should keep this and any other IRS letters about advance child tax credit payments with their tax records. Individuals can also create or log in to IRS.gov online account to securely access their child tax credit payment amounts.
Economic impact payments and claiming the recovery rebate credit
Individuals who didn’t qualify for the third economic impact payment or did not receive the full amount may be eligible for the recovery rebate credit based on their 2021 tax information. They’ll need to file a 2021 tax return, even if they don’t usually file, to claim the credit.
Individuals will need the amount of their third economic impact payment and any plus-up payments received to calculate their correct 2021 recovery rebate credit amount when they file their tax return.
In early 2022, the IRS will send Letter 6475 that contains the total amount of the third economic impact payment and any plus-up payments received. People should keep this and any other IRS letters about their stimulus payments with other tax records. Individuals can also create or log in to IRS.gov online account to securely access their economic impact payment amounts.
More information:
Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return
Tag: IRS
There are steps people, including those who received stimulus payments or advance child tax credit payments, can take now to make sure their tax filing experience goes smoothly in 2022. They can start by visiting the Get Ready page on IRS.gov. Here are some other things they should do to prepare to file their tax return.
Gather and organize tax records
Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately. This includes:
• Forms W-2 from employers
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan
• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy
• Form 1099-INT for interest received
• Other income documents and records of virtual currency transactions
Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.
Income documents can help taxpayers determine if they’re eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.
Taxpayers should also keep end of year documents including:
• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments
• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage
Confirm mailing and email addresses and report name changes
To make sure forms make it to the them on time, taxpayers should confirm now that each employer, bank and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.
View account information online
Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.
Review proper tax withholding and make adjustments if needed
Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change.
People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.
The IRS reminds taxpayers there are things they should do before the current tax year ends on Dec.31.
Donate to charity
Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov allows users to search for charities. It provides information about an organization’s federal tax status and filings.
The law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations even if they don’t itemize their deductions. Taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.
Most cash donations made to charity qualify for the deduction. However, there are some exceptions. Cash contributions include those made by check, credit card or debit card as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.
Check Individual Taxpayer Identification Number
An ITIN only needs to be renewed if it has expired and is needed on a U.S. federal tax return.
If an Individual Taxpayer Identification Number was not included on a U.S. federal tax return at least once for tax years 2018, 2019 and 2020, the ITIN will expire on Dec. 31, 2021.
As a reminder, ITINs with middle digits 70 through 88 have expired. In addition, ITINs with middle digits 90 through 99, if assigned before 2013, have expired. Individuals who previously submitted a renewal application that was approved, do not need to renew again.
Find information about retirement plans
IRS.gov has end-of-year tax information about retirement plans. This includes resources for individuals about retirement planning, contributions and withdrawals.
Contribute salary deferral
Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the
$19,500 limit for 2021.
Get banked and set up direct deposit
Direct deposit gives taxpayers access to their refund faster than a paper check. Those without a bank account can learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.
Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.
Connect with the IRS
Taxpayers can use social media to get the latest tax and filing tips from the IRS. The IRS shares information on things like tax changes, scam alerts, initiatives, tax products and taxpayer services. These social media tools are available in different languages, including English, Spanish and American Sign Language.
Think about tax refunds
Taxpayers should be careful not to expect getting a refund by a certain date. This is especially true for those who plan to use their refund to make major purchases or pay bills. Just as each tax return is unique to the individual, so is each taxpayer’s refund. Taxpayers can take steps now to Get Ready to file their federal tax return in 2022.
If you are sex worker full time it may benefit you to form an LLC or an S-Corporation for tax purposes. If you have questions or need help feel free to ask us.
Small business owners have a variety of tax responsibilities. The IRS knows that understanding and meeting tax obligations is vital to the success of all businesses, especially a new one. IRS.gov has the resources and information to help people through the process of starting a new business.
Here are some tips for new entrepreneurs:
Choose a business structure.
The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
• Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
• Partnership: An unincorporated business with ownership shared between two or more people.
• Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
• S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
• Limited Liability Company: A business structure allowed by state statute.
Choose a tax year.
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
• Calendar year: 12 consecutive months beginning January 1 and ending December 31.
• Fiscal year: 12 consecutive months ending on the last day of any month except December.
Apply for an employer identification number.
An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one of these numbers. It’s important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.
Have all employees complete these forms:
• Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services
• Form W-4 Employee’s Withholding Allowance Certificate
Pay business taxes.
The form of business determines what taxes must be paid and how to pay them.
Small business owners, self-employed people, and some wage earners should look into whether they should make estimated tax payments this year. Doing so can help them avoid an unexpected tax bill and possibly a penalty when they file next year.
Taxpayers who earn a paycheck usually have their employer withhold tax from their checks. This helps cover taxes the employee owes. On the other hand, some taxpayers earn income not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments.
Here are some details about estimated tax payments:
• Generally, taxpayers need to make estimated tax payments if they expect to owe $1,000 or more when they file their 2021 tax return, after adjusting for any withholding.
• The IRS urges anyone in this situation to check their withholding using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 to their employer.
• Aside from business owners and self-employed individuals, people who need to make estimated payments also include sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
• Corporations generally must make these payments if they expect to owe $500 or more on their 2021 tax return.
• Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.
• The final two deadlines for paying 2021 estimated payments are September 15, 2019 and January 15, 2022.
• Taxpayers can check out these forms for details on how to figure their payments:
o Form 1040-ES, Estimated Tax for Individuals
o Form 1120-W, Estimated Tax for Corporations
• Taxpayers can visit IRS.gov to find options for paying estimated taxes. These include:
o Direct Pay from a bank account.
o Paying by credit or debit card or the Electronic Federal Tax Payment System.
o Mailing a check or money order to the IRS.
o Paying cash at a retail partner.
• Anyone who pays too little tax through withholding, estimated tax payments, or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund.
The IRS Non-filer Sign-up Tool offers a free and easy way for eligible people who don’t normally have to file taxes to provide the IRS the basic information needed – name, address, and Social Security numbers – to figure and issue advance child tax credit payments. Often, these are individuals and families who receive little or no income, including those experiencing homelessness.
Here’s who should use this tool
This tool is for people who did not file a tax return for 2019 or 2020 and did not use the IRS Non-filer tool last year to register for Economic Impact Payments. It enables them to provide required information about themselves, their qualifying children age 17 and under, their other dependents, and their direct deposit bank information so the IRS can quickly and easily deposit the payments directly into their checking or savings account.
Here’s who should not use this tool
Eligible families who already filed or plan to file 2019 or 2020 income tax returns should not use this tool. Once the IRS processes their 2019 or 2020 tax return, the information will be used to determine eligibility and issue advance payments. Families who want to claim other tax benefits, such as the earned income tax credit, should not use this tool. They should file a regular tax return. For them, the fastest and easiest way to file a return is the Free File system, available only on IRS.gov.
About the advance child tax credit
The expanded and newly-advanceable child tax credit was authorized by the American Rescue Plan Act, enacted in March. Normally, the IRS will calculate the payment based on a person’s 2020 tax return, including those who use the Non-filer Sign-up tool. If that return has not yet been filed or is still being processed, the IRS will determine the initial payment amounts using the 2019 return or the information entered using the Non-filer tool that was available in 2020.
The payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17.
The IRS will issue these payments by direct deposit if correct banking information has been provided to the IRS. Otherwise, people should watch their mail around July 15 for their mailed payment. The dates for the advance child tax credit payments are July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.
See Advance Child Tax Credit Payments in 2021 on IRS.gov for details on eligibility and more helpful resources.
The IRS asks community groups, non-profits, associations, education organizations and anyone else with connections to people with children to share this critical information about the advance child tax credit as well as other important benefits.
Year-round tax planning is for everyone. An important part of that is recordkeeping. Gathering tax documents throughout the year and having an organized recordkeeping system can make it easier when it comes to filing a tax return or understanding a letter from the IRS.
Good records help:
• Identify sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from nonbusiness income and taxable from nontaxable income.
• Keep track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
• Prepare tax returns. Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.
• Support items reported on tax returns. Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.
Download this spreadsheet to keep track of all of your expenses and income. Expenses Spreadsheet
In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.
Records to keep include:
• Tax-related records. This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents – electronic or paper – that support income, a deduction, or a credit reported on their tax return.
• IRS letters, notices and prior year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Taxpayers who receive 2021 advance child tax credit payments will receive a letter early next year that provides the amount of payments they received in 2021. Taxpayers should refer to this letter when filing their 2021 tax return in 2022.
• Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
• Business income and expenses. For business taxpayers, there’s no particular method of bookkeeping they must use. However, taxpayers should find a method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
• Health insurance. Taxpayers should keep records of their own and their family members’ health care insurance coverage. If they’re claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.
The Internal Revenue Service is conducting an “ongoing, extensive investigation involving substantial IRS resources” into cryptocurrency holders. As part of that investigation, the IRS is serving “John Doe” summons on various cryptocurrency companies, seeking court orders to require cryptocurrency exchanges to turn over account holder’s names and other key identifying information. On May 5, 2021, the United States District Court for the Northern District of California ordered Kracken to turn over key account information for its users, including (1) Name, (2) Taxpayer ID Number; (3) Date of birth; (4) Physical address; (5) Telephone number; and (6) Email address. For cryptocurrency investors who have unreported crypto – whether in an account with Kraken or anywhere else – the IRS is looking for you.
The IRS first filed a petition for leave to serve a John Doe summons, which would have required Kraken to provide specific account holder information to the IRS, on March 30, 2021. Rather than granting the petition, the Court issued an Order to Show Cause, requiring the IRS to explain why the petition, which requested a vast array of information, should not be denied for the failure to meet the “narrowly tailored” requirement of the statute authorizing such summonses. (You can read more about that here). The IRS responded by both reducing the scope of information requested and by explaining that when it comes to cryptocurrency, a lot of information is needed to determine whether or not a taxpayer is skirting the rules.
The IRS explained to the court that more than just a taxpayer’s name, address, date of birth, and taxpayer identification number are needed to determine whether there is a tax compliance issue. The extensive information is needed because the IRS is aware of account holders whose information was handed over in the Coinbase case that used “aliases, false addresses, or post office boxes, fictitious entity names, or other means to disguise their true identities, and taxpayers who created false identities are more likely to evade their taxes.” (emphasis added). In fact, in response to the Coinbase John Doe summons, over 170 account holders used a pseudonym instead of their legal name to set up an account. Driving home its point that it needs more than just account holder names and taxpayer identification numbers, the IRS explained to the court that “more than 750 [Coinbase account holder] taxpayers remain unknown to the IRS. These still-unidentified taxpayers had cryptocurrency proceeds that exceeded $100,000,000 that the IRS cannot examine because the limited identity information it received precludes a positive identification.” Put differently, from the Coinbase John Doe Summons alone, the IRS is still seeking names of 750 account holders who realized over $100,000,000 in proceeds and the IRS cannot identify them without additional information.
It is no wonder, then, that the IRS launched Operation Hidden Treasure to identify and pursue crypto account holders who have not reported and paid taxes on their crypto gains. And in asking the court in Kraken to allow access to specific account holder information, including a history of changes to the user’s profiles, the IRS has demonstrated its ability to learn from past mistakes and nimbly make adjustments. After reviewing the IRS’s response to the Order to Show Cause, the Court granted the modified petition. IRS Commissioner Charles Rettig applauded the ruling, noting, “There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions. This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share.”
Importantly, the Court leaves open the possibility that further challenges to the summons may be brought. “Any further disputes as to the scope of the summons would benefit from adversarial briefing.” But the IRS now has the leave of court required to serve the John Doe summons. The statute that authorizes the summons process provides “any person who is entitled to a notice of a summons … shall have the right to begin a proceeding to quash such summons” within twenty days of service. A motion to quash is typically filed by a taxpayer whose information is being sought by a summons. In this case, it isn’t clear whether Kraken will notify its account holders when it has been served and the twenty-day clock to file a motion – for Kraken and for its account holders – begins. Even more uncertain is whether a motion to quash would yield any measurable result in narrowing the account information to be turned over.
What’s Next For Crypto Tax Enforcement?
The Coinbase and Kraken John Doe summons are by no means the end of the line for IRS enforcement. On April 1, 2021, the United States District Court for the District of Massachusetts granted a similar petition for a John Doe Summons to issue providing account information from Circle Internet Financial, formerly Poloniex LLC. The IRS has used John Doe summons very effectively before, most famously leading to the disclosure of tens of thousands of previously unreported foreign financial accounts and collection billions of unpaid federal income taxes. The first Swiss bank to receive a John Doe summons was UBS, but they were by no means the last. Crypto investors who have not reported all income earned should take no comfort if they haven’t yet heard from the IRS, or if they are at another exchange that isn’t named in this article. Operation Hidden Treasure isn’t aimed at identifying Coinbase account holders or Kraken account holders. It is aimed at identifying all crypto investors who are United States taxpayers, determining whether tax obligations have been met, and pursuing those who have failed to meet those obligations.
In my prior article on Operation Hidden Treasure, I urged readers who have undisclosed crypto to call a lawyer instead of confessing their “sins” to an accountant. There’s a good reason for this, and don’t just take my word for it. Tax litigator Anson Asbury explains why its best – for your and for your accountant – to take the approach of calling counsel if you are worried about past mistakes. “If you’ve made incomplete disclosures for prior years, and your accountant doesn’t know about it, she is not the person you want to tell for a number of reasons. You do not want to put her in the position where she is tempted to mislead an inquiring revenue agent about your disclosures (because she does not want to admit that the previously filed return she prepared was not accurate). That only puts both of you in jeopardy if the inconsistency is uncovered.” In addition, notes Asbury, “You also do not want to share any information with her that you do not want disclosed.” Accountants can and often are called to testify about what their clients did and did not tell them, and may not keep communications confidential in IRS civil or criminal examinations. “Finally,” says Asbury, “you want to preserve your accountant as a witness. She may be your best defense for reasonable cause. She cannot be a witness for you if she knows incriminating details that would have to be disclosed under oath.” Honestly is always the best policy when it comes to the current year’s return, but past sins should only be “confessed” to a lawyer.
from
www.forbes.com/sites/irswatch/2021/05/13/release-the-kraken-district-court-orders–all-crypto-investors-should-pay-attention/?ss=taxes&sh=6219e3487356
WASHINGTON – The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.
Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.
Unscrupulous tax return preparers may also:
• Require payment in cash only and not provide a receipt.
• Invent income to qualify their clients for tax credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer’s account.
The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.
No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.
WASHINGTON — The Internal Revenue Service today reminds taxpayers that the fastest way to get their tax refund is by filing electronically and choosing direct deposit.
Direct deposit is free, fast, simple, safe and secure. Taxpayers can even split their refund to have it deposited into one, two or three different accounts.
Eight out of 10 taxpayers get their refunds by using direct deposit. The IRS uses the same electronic transfer system to deposit tax refunds that is used by other federal agencies to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.
Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable. And it saves taxpayer money. It costs more than $1 for every paper refund issued, but only a dime for each direct deposit.
Easy to use
A taxpayer simply selects direct deposit as the refund method when using tax software or working with a tax preparer, and either they or their tax preparer type in their account and routing number. It’s important to double check entries to avoid errors.
The IRS reminds taxpayers they should only deposit refunds directly into U.S. affiliated accounts that are in their name, their spouse’s name or both if it’s a joint account. Many people do not use checks and may find their routing and account numbers on their online bank account or mobile app.
Taxpayers may have a refund applied to their prepaid debit card. Many reloadable prepaid cards have account and routing numbers that could be provided to the IRS. But check with the financial institution to make sure the card can be used and verify the routing number and account number, which may be different from the card number.
There are mobile apps that may allow for direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on a tax return. Check with the mobile app provider to confirm what numbers to use.
Have the bank routing and account number when having taxes prepared. The IRS does not have the ability to accept this information after a return is filed.
Don’t have a bank account?
Visit the FDIC website for information on where to find a bank that can open an account online and how to choose the right account. Veterans can use the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks. Tax return preparers may also offer electronic payment options.
Split refunds
By using direct deposit, a taxpayer can split their refund into up to three financial accounts, including a bank or Individual Retirement Account. Part of the refund can even be used to purchase up to $5,000 in U.S. Series I Savings Bonds.
A taxpayer can split their refund by using tax software or by using Form 8888, Allocation of Refund (including Savings Bond Purchases), if they file a paper return. Some people use split refunds as a convenient option for managing their money, sending some of their refund to an account for immediate use and some for future savings.
No more than three electronic tax refunds can be deposited into a single financial account or prepaid debit card. Taxpayers who exceed the limit will receive an IRS notice and a paper refund will be issued for the refunds exceeding that limit.
Combining Electronic Filing plus direct deposit yields fastest refunds
The safest and most accurate way to file a tax return is to file electronically. Many people may be eligible to file electronically for Free. Most refunds are issued in less than 21 days, but some returns may take longer. Taxpayers can track their refund using “Where’s My Refund?” on IRS.gov or by downloading the IRS2Go mobile app.
“Where’s My Refund?” is updated once daily, usually overnight, so there’s no reason to check more than once per day or call the IRS to get information about a refund. Taxpayers can check “Where’s My Refund?” within 24 hours after the IRS has received their e-filed return or four weeks after mailing a paper return. “Where’s My Refund?” has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved, and (3) Refund Sent.