Are you planning on saving a portion of your tax refund this year? You should know about an option the IRS offers to make it easier for you to save. This can be done by including IRS Form 8888, Allocation of Refund, when you file your tax return. Using this form, you can split your refund between three options; direct deposit into a bank account, Series l Savings Bonds, or payment by check.
Many people take advantage of the ability to directly deposit their tax refund right into their checking account. But what they don’t know is they have the option to direct deposit funds in up to three different accounts. These bank accounts can be a checking account, savings account, Individual Retirement account (IRA), Health Savings Account (HSA), Archer MSA, Coverdell Education Savings Account (ESA), or TreasuryDirect online account. All of these provide many options to help you save.
The only time you can get a Series l Savings Bond in paper form is by getting it with your tax refund. On January 1, 2012, financial institutions stopped issuing U.S Series l Savings Bonds in paper form, meaning you cannot walk into a bank to purchase one. You have to purchase them electronically through a TreasuryDirect account. By using the tax refund option, you can get up to $5,000 worth of Series l savings bonds in paper form. These must be issued in multiples of $50 and can be allocated between three different savings bond registrations, meaning you can give these savings bonds as gifts or get them for yourself.
The Allocation of Refund form can help greatly with saving because you can choose how you want to receive your refund. For example, you can deposit part your refund in a savings account, get $150 of savings bonds, and have the additional amount sent to you by check. Everyone knows it’s hard to save your refund when you get that check, but by using this tool you can put aside a portion of your refund before you even have the chance to spend it.