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Triple tax-refund saving option

Married couples can ask the IRS to directly deposit a refund on a joint return into individual accounts held by either partner or one held in both names. However, do verify that your financial institution will accept a joint refund sent to an individual account.

You do have to receive a minimum refund amount to use the split deposit option. But when the IRS says minimum, in this case it means minimum.

As long as you request at least $1 go directly into each account, the IRS will follow your instructions. So if your refund is $3, you can have one buck each sent to three accounts.

You can allocate different amounts to accounts

There isn't, however, any requirement that you divide your refund equally. If you're getting back $1,000, you can send $900 to savings, $99 to a money market account and $1 to checking.

But for any refund to go into an account, the money must be held in a U.S. financial institution, such as a bank, mutual fund, brokerage firm or credit union. And make sure the institution accepts direct deposits. Most do, but check just in case. A bank, for example, may accept direct deposits for regular savings accounts, but not for education savings accounts.

Also ask your financial institution about fees associated with electronic transactions. Again, that's generally not a problem with deposits, but you don't want any unpleasant surprises when you're expecting your tax refund. If your bank does refuse a direct deposit, the IRS will send you that refund portion as a paper check.

In addition to standard checking and passbook savings accounts, you can send your refund directly to other financial instruments. Examples include money market accounts; health savings accounts, or HSAs; Archer medical savings accounts, or MSAs; and Coverdell education savings accounts.

As long as the account has a routing number, says Perlman, there's no problem.

And while it might help you get your financial house in order, you can't ask the IRS to send your refund directly to your credit card company, utility provider or lender, even if the debt is held by the same bank where you have your checking or savings account.


Watch out for potential IRA snafus

You can, though, direct your refund or a part of it to an individual retirement account, either a traditional account, a Roth IRA or, if you're self-employed, a SEP-IRA. But there are some details you need to consider.

First, set up your retirement account before you request the direct deposit to it, and let your IRA trustee know that the IRS will be transferring money into that account.

Also, be sure to tell your IRA trustee what tax year you want the refund deposit applied toward, because the transaction from the IRS won't indicate that. If you don't designate whether the refund is for a 2008 or 2009 contribution, the trustee can assume the deposit is for this year. That could pose a problem if you counted the refund deposit as a 2008 contribution and claimed a deduction for it.

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