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Direct deposit your tax refund . . . but be careful

Direct deposit sounds like a no-brainer when it comes to getting a tax refund. Who would want to waste time and keep running to the mailbox to keep an eye out for a fat tax refund check?

But it's not foolproof. Ever think about what happens if you enter the wrong account number? Or if somehow that refund is deposited into someone else's bank account?

"It may not happen very often, but when it happens to you, it's a very big deal," said Steve Kenneally, vice president of the American Bankers Association.

The IRS warned taxpayers this year that listing incorrect bank account information is a key, and common, error to avoid.

And unfortunately, there is not a way to change a direct deposit account number after electronically filing that return.

If you spot trouble immediately, you might have a chance at stopping the direct deposit. If the tax return has not already posted to its system, you can ask the IRS to stop the direct deposit by calling 1-800-829-1040 from 7 a.m. to 7 p.m. weekdays.

The bank isn't required to match up the name on the account to the account number. In some cases, the bank might refuse the direct deposit. But in many cases, it goes to the account number provided, Kenneally said.

Eight out of 10 taxpayers use direct deposit to get their federal income tax refunds. Taxpayers can request direct deposit even if they still file an old-fashioned paper return.

Direct deposit is promoted as a way to avoid waiting a long time for a tax refund and stop thieves who go through mailboxes and steal tax refund checks.

Before you file a return: See Page 2 of the regular 1040 form in the refund section. On Line 76b, you list the routing number of your bank and check a box marked "C" for whether the account is for checking or savings. You'd list your bank account number on Line 76d.

You also might need Form 8888 for the Allocation of Refund, which is used to split your refund among two or three bank accounts.

Kenneally said consumers should talk with their bank to make sure the routing number on the check is the same routing number that would be used for direct deposit. In most cases, the numbers are the same. But some banks use different routing numbers for direct deposit.

The IRS notes that if you incorrectly enter an account or routing number that belongs to someone else and your financial institution deposits the money into someone else's account, you must work with the bank to recover your money.

Direct deposit your tax refund . . . but be careful 04/08/16 [Last modified: Friday, April 8, 2016 9:54pm]
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