By Theresa Fry, Senior Vice President and Manager, IRA’s and Retirement PlanningPrint This Post
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. You will need your Social Security Number, your tax filing status, and the exact amount of your refund to use them. Regardless of the method you use, in most cases you will simply learn that your tax return has been received and is being processed.
The majority of IRS refunds are processed within three weeks, and last year the average federal income tax refund was just under $2,500. Before you go planning your next vacation, you may want to consider using your refund to start or build up an emergency fund, lighten your debt, or bulk up your retirement savings.
If you haven’t yet 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? And if you file IRS Form 8888, you can split your refund into as many as three different accounts, including IRAs. 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.