Tax Hack: Direct to Savings

Whenever I have a a refund coming from the IRS there’s always an internal struggle against what I know I ought to do (save it) and what the evil voices in my head tell me to do (spend it). Here’s a relatively simple hack to help fight the evil voices: Have your refund sent directly to savings. With Form 8888, Direct Deposit of Refund to More Than One Account you can specify up to 3 different accounts to have portions of your tax refund deposited into. So you can automatically have some of your refund directed into your Roth-IRA or other savings/brokerage accounts. You’ll want to check with the financial institutions in question to make sure there aren’t any fees associated with an electronic deposit.

One word of warning when using this form or the standard account direct deposit option on your tax forms: Make sure you enter the correct account information. If the refund is somehow deposited into an incorrect account, you are very likely out of luck. Banks are generally prohibited from disclosing account holder information and the IRS can’t disclose details about individual taxpayers.

This is a great way to get a jump on your investment goals for 2008 though if you are due a refund this year.