Why Is It Useful To Have Your Bank Account And Routing Numbers When Using Tax Preparation Software?
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Why is it useful to have your bank account and routing numbers when using tax preparation software?
The main reason is speed: with those numbers, the IRS can deposit your refund directly into your account, and you can pay any tax you owe straight from your bank. Here's how tax software uses this information.
The Efficiency of Tax Preparation Software
Tax software walks you through your return and lets you file electronically. Here's why having your account and routing numbers handy helps:
Direct Deposit for Refunds
Fast, Secure, and Convenient
If you're due a refund, entering your routing and account numbers lets the IRS send it by direct deposit. The IRS says e-filing with direct deposit is the fastest way to get a refund and that it issues more than nine out of ten refunds in less than 21 days.
Direct deposit also avoids the risk of a paper check being lost, stolen or left uncashed.
Payment of Taxes Owed
Effortless Electronic Payments
If you owe tax, you can pay from your bank account when you e-file. The IRS calls this electronic funds withdrawal (EFW), and it is available when you file with tax software or through a tax professional.
You enter your routing and account numbers, choose a payment date, and the payment is debited from your account. It is more convenient than mailing a check.
Electronic Filing Verification
Getting the Details Right
Your bank details don't verify your identity to the IRS; you sign and validate an e-filed return with your prior-year adjusted gross income or prior-year Self-Select PIN. What your bank details do need is accuracy.
The routing number identifies your bank, and the account number identifies your account. You can usually find both on a check or in your bank's app or website.
Automatic Savings or Investment
Maximizing Your Refund
You can split a federal refund by direct deposit into up to three accounts, including an IRA. Tax software handles this for you, or paper filers can use Form 8888, Allocation of Refund.
Splitting a refund makes it easy to send part straight to savings. You need the routing and account number for each account.
Avoid Errors
Minimizing Mistakes
A wrong digit can send your refund to the wrong account or delay it, so the IRS advises you to double-check your entry. Copy the numbers directly from your bank's records rather than from memory.
If a refund goes to the wrong account, contact your bank first; the IRS explains the next steps, such as filing Form 3911 to trace the refund.
Record Keeping
Digital Trail for Financial Clarity
Electronic refunds and payments leave a clear record in your bank statements. That makes it easier to match what the IRS sent or received with your tax records.
In short, having your bank account and routing numbers ready when you use tax software lets you get your refund faster, pay any balance due electronically and avoid delays caused by missing or mistyped information.
Sources
- Get your refund faster: Tell IRS to direct deposit your refund to one, two, or three accounts, Internal Revenue Service
- Pay taxes by electronic funds withdrawal, Internal Revenue Service
- Validating your electronically filed tax return, Internal Revenue Service
