Key takeaways
- Setting up direct deposit for your tax refund is a free and easy way to receive your funds faster and more securely than a paper check.
- Direct deposit can get your refund into your account up to three weeks sooner than waiting for a paper check.
- You can split your direct deposit into two or three accounts to automatically contribute to your savings account.
- It’s important to confirm you are using the correct routing and account number and that your financial institution will accept this deposit to avoid problems receiving your money.
If you are anticipating receiving a tax refund this year, direct deposit is the fastest, safest way to receive your funds. Eight out of 10 taxpayers use direct deposit for their refunds, and the IRS even encourages it as the best way to receive a tax refund.
This free, contactless method delivers your refund electronically directly to your bank account, typically within 21 days of filing for electronic returns — compared to six to eight weeks for paper returns with mailed checks.
Direct deposit also eliminates the risk of lost or stolen checks while giving you the option to split your refund among different accounts.
How to set up direct deposit for your tax refund
In most cases, it’s quick and easy to set up direct deposit, whether your filing electronically or by paper.
First, you’ll need the routing number and account number from your bank account. These numbers must be entered correctly to avoid delays or misdirected deposits.
Where to find your account information on a check
On a paper check, the routing number is the 9-digit number on the bottom left, followed by your account number in the middle, and then the check number on the right.
Some financial institutions also list routing numbers on their websites, though your specific account number will only be accessible through secure channels.
Andrea Coombes, CFP and Bankrate’s tax editor, advises checking with the provider to make sure you have the correct routing and account numbers. With most bank accounts, it’s easy to get these numbers by logging into your account and looking up your account details.
“The most crucial thing when it comes to setting up direct deposit is confirming you are putting in the account and routing numbers correctly. If you enter the wrong numbers, it’s going to be a real headache to get your money. This means two things — carefully entering in the numbers and double-checking it, but also making sure you’re using the right numbers. For instance, some prepaid debit cards may let you receive a direct deposit, but the number on the card probably isn’t the account number.”
— Andrea Coombes, CFP, Tax Editor
According to the IRS, your refund should only be deposited into a U.S. bank or U.S. bank-affiliated account that is in your name, your spouse’s name or a joint bank account. You should also confirm that your financial institution will accept this type of direct deposit.
Once you have your information, you can go ahead and select direct deposit as your refund method when prompted in your tax software or paper form, and then enter your banking details.
If you’re filing a paper return, you’ll need to complete the “Refund” section (lines 35a-d) on Form 1040. If you’re splitting your refund, make sure to complete Form 8888 “Allocation of Refund” (either electronically or on paper)
After filing, use the IRS “Where’s My Refund” tool to track your refund status. Most direct deposits arrive within 21 days of filing electronically. Here’s a closer look at the tax refund schedule.
Benefits of using direct deposit for your tax refund
Opting for direct deposit offers several advantages over traditional paper checks:
Get your refund faster: Opting for direct deposit gets you your refund in less time than a paper check (especially if the check gets lost in the mail). This faster processing means you can put your money to work sooner, whether paying down debt or building savings. Compare the best high-yield savings accounts to maximize your refund.
More secure: Your funds are electronically deposited into your account eliminating the risk of a mailed check getting lost, stolen or damaged. Mail theft-related check fraud has been increasing in recent years according to the FBI and the United States Postal Inspection Service, making direct deposit the more secure option.
Money tip:
The IRS will never contact you by email, text message or social media to request personal or financial information. If you receive such messages claiming to be from the IRS about your refund, do not respond or click on any links — these are likely phishing attempts.
Option to split your refund: You can split your tax refund into two or three accounts, including your checking account, savings account, individual retirement account (IRA), health savings account or reloadable prepaid debit card. You can even opt to deposit your funds into or purchase paper series I savings bonds. This automatic splitting makes it easier to save part of your refund without the temptation to spend it first.
Coombes says it can be smart to divvy up your tax refund, such as using a portion to pay off bills but also adding to your emergency savings or saving for a big trip. “You can send some of your tax refund to your checking account and some to your high-yield savings account.”
“But if you’ve already got it set up where you can easily transfer money between your accounts, then I’d use just one account for the tax refund. Then, once you get your refund, you can easily divide it up among your accounts. That reduces the chances of entering an incorrect routing or account number.”
Common questions about tax refund direct deposit
What happens if I enter incorrect banking information?
If you enter incorrect bank information, one of two things may happen:
- If the routing number doesn’t exist or the account number doesn’t match an account at that institution, the IRS will mail you a paper check instead, which will delay your refund.
- If you enter information for a valid account that isn’t yours, and the bank accepts the deposit, you’ll need to work directly with that financial institution to recover your funds. The IRS cannot recover the money for you.
Can I set up direct deposit if I don’t have a bank account?
If you don’t already have a bank account, you’ll need to open one to use direct deposit. Consider opening an FDIC-insured bank account or NCUA-insured credit union account, which offers benefits beyond just receiving your tax refund:
- Keeping your money secure
- Easier tracking of your finances
- Potential to earn interest on your balance
- Access to other banking services
Learn more about Bankrate’s best checking accounts
How do I know if my direct deposit was successful?
You can check the status of your refund using the “Where’s My Refund” tool on the IRS website or through the IRS2Go mobile app. These tools are typically updated once daily and will show: when your return was received, when your refund is approved and when your refund was sent. Here’s Bankrate’s guide to track your tax refund.
Bottom line
Setting up direct deposit for your tax refund is a way to get your return faster and safer (it’s the same system used to deposit nearly 98 percent of Social Security and Veteran Affairs benefits to millions.) Just be sure to enter your routing and account number correctly and confirm your financial institution will accept this deposit.
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