By Theresa Cagle Fry, Senior Vice President and Manager of IRA’s, Retirement & Education Planning
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If you have filed your tax return and are anxiously awaiting your income tax refund, the IRS (and most states) now have a variety of ways for you to quickly check the status of your refund—online, over the phone or through a smartphone app. To use them you will typically need your Social Security Number, your tax filing status, and the exact amount of your refund. For federal income tax returns, the IRS provides a “Where’s My Refund?” tool which provides three status updates: Return Received, Refund Approved, and Refund Sent.
The majority of IRS refunds are processed within three weeks. Filing electronically and using direct deposit can reduce errors and get your refund to you faster. The average refund for federal tax returns processed through the end of February was $3,473, up 15% over last year.* Your tax refund could provide a great start or addition to your emergency fund, used to lighten your debt, or to bulk up your retirement savings.
If you haven’t filed your tax return and are expecting a refund this year, there is an easy way to turn that refund into retirement savings without being tempted to spend it. Did you know you can direct deposit your tax refund into your IRA? The IRS provides the ability to deposit your tax refund into up to three different accounts, including IRAs, by including Form 8888 when you file your return. As with all IRA deposits, you are limited to total combined contributions of $6,000 (or $7,000 if you are age 50 or older) a year. Check with your financial institution beforehand to get the appropriate account and routing information and to verify they will treat the deposit as a current year IRA contribution.
Benjamin F. Edwards does not provide tax advice; therefore, it is also important to consult with your tax professional for additional guidance tailored to your specific situation.
*Filing Season Statistics for Week Ending February 25, 2022 | Internal Revenue Service (irs.gov)