Why is it useful to have your bank account and routing numbers when using tax preparation software?

Benefits of Entering Bank Account Information for Tax Returns and Refunds

Direct Deposit of Refunds

1. Speed: Direct deposit is the fastest way to receive a tax refund. According to the IRS, most refunds are issued in less than 21 days for e-filed returns.

2. Security: Direct deposit eliminates the risk of a refund check being lost, stolen, or returned to the IRS as undeliverable.

3. Convenience: Funds are deposited directly into the taxpayer's account, saving a trip to the bank.

4. Flexibility: Taxpayers can split their refund into up to three financial accounts, including checking, savings, or retirement accounts.

Efficient Processing of Tax Returns

1. Accuracy: Entering bank account information directly into tax software reduces the potential for errors that can occur when manually inputting data.

2. Verification: Tax preparation software often includes verification steps to ensure that the bank account and routing numbers are entered correctly.

3. Streamlined Workflow: Having bank account information within the software allows for a more streamlined process for both filing the return and receiving any refunds or making payments.

Electronic Funds Withdrawal

1. Convenience for Payments: If taxpayers owe money, they can use the bank account information to set up an electronic funds withdrawal for the payment due date.

2. Control: Taxpayers can specify the payment date, giving them control over the timing of the payment and helping to avoid late payment penalties.

IRS e-file Signature Authorization

1. Simplified Signatures: For joint returns, both spouses can e-sign the e-file authorization form when their bank account information is already entered into the system.

2. Record Keeping: Electronic records of the authorization, including bank account information, are maintained within the software for easy access and reference.

Avoiding Refund Delays

1. Correct Information: Entering bank account information helps avoid delays in refunds due to incorrect address or delivery issues associated with paper checks.

2. Direct Deposit Requirement: The IRS requires direct deposit for certain types of refunds, and having bank account information on file ensures compliance with these requirements.

Supporting References

- The IRS's "Authorized IRS e-file Providers of Individual Income Tax Returns" document emphasizes the importance of direct deposit for refunds and avoiding refund delays [Publication 1345].

- The "Get ready to file your taxes" page on the IRS website outlines the benefits of using an online account to manage tax records and payments, including direct deposit [Get ready to file your taxes].

- The "Refunds" page on the IRS website provides detailed information on the refund process, including the benefits of direct deposit [Refunds].

By entering bank account and routing numbers into tax preparation software, taxpayers can ensure a more efficient, secure, and convenient tax filing experience.

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Sources:

Authorized IRS e-file Providers of Individual Income Tax Returns 2024-07-30

Get ready to file your taxes | Internal Revenue Service 2024-08-03

Internal Revenue Service 2024-08-03

Publication 4163 (Rev. 12-2023) - Internal Revenue Service 2024-08-02

Refunds | Internal Revenue Service 2024-08-03

Get ready to file in 2024: What’s new and what to consider 2024-08-02

1040 (2023) | Internal Revenue Service 2024-08-03

Section 5. IRS e-file of Individual Income Tax Returns 2024-07-31

Note: The draft you are looking for begins on the next page. Caution ... 2024-07-30