Bankrate's 2009 Tax Guide
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Triple tax-refund saving option

If you are using the refund as a prior year contribution, also make sure you file early enough so that it's directly deposited into your IRA by the April 15 deadline. It usually takes around two weeks for an e-filed direct deposit to be completed, but don't run up too closely against the due date. If the money shows up in your account a day after the deadline, it will be counted as a 2009 contribution.

And if you counted the directly deposited refund contribution as a deduction in figuring your 2008 taxes, but it ends up being made in the 2009 tax year, you'll have to refigure your correct tax bill and refund amount on an amended return.

What if your refund amount is different than expected?

Sometimes other unexpected things cause refund amounts to be different. Math errors, for example, could hurt or help your ultimate refund. When that happens and you've requested direct deposits to multiple accounts, the IRS has established a system for allocating the new amount among the accounts.

In the case of a larger refund because of a math or similar error, the IRS will add the difference to the last account you designated, i.e., the account shown on line 3 of Form 8888 if you named three accounts, or line 2 if you just chose two.

A similar process applies when a refund is reduced, either because of an error on your part or because the IRS determines that you owe previously unpaid federal taxes.

For example, a taxpayer who asks that a $1,200 refund be split among three accounts but whose refund is subsequently cut in half because of an error or due tax can find the money distributed in a certain way.

What if your refund amount is different?
Designated accountsOriginal deposit requestError adjustments
Savings$500$500
IRA$500$100
Checking$200$0

To make up the $600 shortfall, the filer's checking account loses out completely and the IRA gets only a fraction of the remaining refund.

The refund realignment is a bit more random when a refund is reduced because the taxpayer owes other debts, known as offsets.

"If your refund is adjusted because of a liability you might have, such as child support, spousal support, or you are delinquent on a student loan, the procedure is somewhat different," says Perlman. "In these cases, the money will come out of the account with the lowest routing number first.

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"The important differentiation is between a refund adjusted because of a mistake -- you claimed the child tax credit and your child is too old -- and one that is reduced because of another liability. So you do have some things to think about in how the IRS will go about depositing your money if there is a change in your refund."

Pay particular attention to any adjustment if one of your accounts is an IRA. Will a larger refund added to a retirement account push you into an excess contribution situation? Or will an offset mean that your direct deposit IRA contribution was negated?

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