4 options for your tax refund

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 that 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.

Savings bonds steps

Part II of Form 8888 is for the purchase of Series I bonds with tax refund money. Taxpayers who opt to buy these inflation-adjusted bonds -- the interest rate is adjusted each May 1 and Nov. 1 -- also have a choice of bond ownership.

You can purchase up to $5,000 in bonds. The only requirement is that the amount be a multiple of $50. For example, if your refund is $570, you can use up to $550 to buy bonds. Then you must select an account into which the IRS will directly deposit the remaining $20.

Different amounts to different accounts

There's no requirement that you divide your refund equally among your accounts. If you're getting back $1,000, you can send $900 to savings, $99 to a money market account and $1 to checking. Basically, as long as an account has a routing number, the IRS can send the money there directly.

But for any tax 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.

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 2014 or 2015 contribution, the trustee can assume the deposit is for this year. That could pose a problem if you counted the refund deposit as a 2014 contribution and claimed a deduction for it.

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 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 2015 contribution. Such bookkeeping differences could force you to refigure your tax bill and refund amount on an amended return.


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