by Donna Taglianetti
This year you have more options and flexibility for choosing how to receive your 2006 federal income tax refund.
Now you can:
- Direct deposit your refund into a single account
- Receive your refund in a paper check
- Split your direct deposit refund among two or three accounts, with up to three different US financial institutions
- Deposit some of your refund into one or more accounts and receive the rest of your refund in a paper check.
Splitting your refund will not cause a delay. In fact, because the IRS uses direct deposit technology, your funds will be in your account(s) faster than if you opt to receive your refund in a paper check.
Taking advantage of the new option is easy. Tax filers who wants to direct deposit into more than one account must use IRS Form 8888 to indicate which accounts and in what amounts they would like their refunds disbursed. Any account in the taxpayer’s name with an account number and routing number can receive part of a federal tax refund. Tax filers can complete this form or ask their tax preparers to complete the form as part of their returns.
Splitting your refund provides a convenient option for managing your money, along with the speed and safety of direct deposit. This option allows you to spend some of your refund on immediate needs, while saving some of your refund for emergencies, a major purchase–like your first home--or your family’s future.
Kick start your down payment savings
This may be a good time to start an Individual Development Account, or IDA. These special savings accounts typically provide a cash match for savings up to $2,000. Every dollar saved may be matched with an additional dollar or, in many cases, $2. For example, an individual who saves $2,000 may receive a $4,000 match. The accounts can be used only for specific purposes, including the purchase of a first home. Funds can also be used for post-secondary education or the startup or expansion of a small business. Eligibility is restricted, in many cases, to individuals who meet income guidelines.
Donna Taglianetti is the executive director at Co-Opportunity in Hartford, CT. She can be reached at donnat@co-opportunity.org or 860-236-3617.