Desktop: Direct Deposit Information
Electronic Returns
In the event that a taxpayer needs to include their direct deposit information in an electronically filed tax return, they can do so when they:
- Go to the Main Menu of the tax return
- From the menu, select Mark Return Electronic
- Then Direct Deposit
- Enter the Routing Transit Number (RTN), Account Number, the Type of Account as well as the Bank Name. To ensure that there is no mistake made, you will be required to enter the RTN and account number twice. Copy the RTN from a check, rather than a deposit slip. There are banks that instead of using an internal routing number on their RTN, they use it in their deposit slips. You have to ensure that the right RTN is transmitted to the IRS to avoid delay of your client's refund.
- Form 8888 helps you to direct deposit into several accounts. Select it if you would like to, specifying the amount of deposit into as many as three separate accounts.
Mailed/Paper Returns
For returns being filed by paper, you can enter direct deposit information when you:
- Go to the Main Menu of the tax return (Form 1040)
- From the menu, select Payments, Estimates & EIC
- Then select Direct Deposit Information
Direct Deposit Limits
The number of refunds that can be electronically deposited into one financial account or a prepaid debit card has been limited by the IRS to three, in a bid to fight fraud and identity theft. The fourth and successive refunds are mailed to the taxpayer after being automatically converted into a paper refund check. Notice is normally sent to the taxpayer, notifying them of the limitation they exceeded and the paper refund check that is to be sent to them. This happens in the event that there are no other issues with the return.
This limitation is applicable to financial accounts and prepaid, reloadable cards or debit cards.
There aren't many affected by this limitation. However, families in which the refunds of both the parents and children are deposited into a single, family held bank account may be affected. In such scenarios, the taxpayers have to make other deposit arrangements if they are to avoid receiving paper refund checks.
This limitation inhibits criminals from the easy acquisition of multiple refunds. It is also a way of preventing a preparer from depositing the client's refund into their bank accounts as a way of obtaining their tax preparation fee.
Direct Deposits are strictly to be made to bank accounts with the name of the taxpayer. Form 8888 cannot be used to split refunds to recover Preparer fees, neither can the fees be recovered by preparer and taxpayer having a joint bank account. Such actions by preparers are punishable under the Internal Revenue Code and Treasury Circular 230.
Additional Information: