TurboTax Support Blog

For Faster Refunds

If you’re in a hurry to get your refund, the fastest way to move it from IRS coffers to you is to have it deposited directly into your bank account.

Lots of taxpayers have already embraced this method, for the benefits of convenience (no running to the bank) and security (no chance for lost checks). More than 61 million people chose to have their refunds deposited directly to their accounts in 2007.

You also have the option of choosing what the IRS calls a “split refund,” that is, dividing your refund among as many as three accounts at three different U.S. financial institutions. These accounts can be of several sorts: checking, savings, brokerage, and IRAs. Just so you know, TurboTax will guide you in getting a direct deposit and a split refund.

Why does the IRS offer the option of divvying up your refund? To encourage taxpayers to save and invest a portion of the money they get back at tax time.

If you sense a mixed message from our government here (save your refund, but spend that proposed tax rebate), you’re not alone. But then we taxpayers are usually conflicted on this subject as well.

Should you opt for a split refund, the IRS offers some pointers: Verify that your financial institution accepts direct deposits, be sure to enter account and routing numbers accurately, and confirm with the institution that a refund received by a couple who filed jointly can be deposited into the account of only one spouse.

If you’re directing your refund into an IRA, it’s up to you to ensure you meet the April 15 deadline for a 2007 contribution and that your IRA trustee knows whether you intend the funds for the year 2007 or 2008.

For more information on split refunds, take a look at this IRS article, "Divide and Prosper." To track your refund, visit the IRS site, "Where's My Refund?"

Do I need to file a return?

It’s not surprising that most of us feel that we must file an annual tax return. After all, even the rich and famous can get in scalding hot water for not paying. (The late hotel magnate Leona Helmsley actually did time in prison for tax evasion. Actor Wesley Snipes has become the latest celebrity to go on trial for failing to pay taxes.)

But the truth is, not everyone needs to file. Even the IRS says so. The agency said that many people will file a 2007 federal income tax return, even though their income fell below the requirements. Based on questions we at TurboTax are seeing from customers in our Live Community, such as students and part-time workers, these requirements aren’t well known.

For Tax Year 2007, single folks don’t need to file unless their annual income tops $8,750 and they’re under age 65, or $10,050, if they’re age 65 or older on Jan. 1, 2008. For married couples filing a joint return and living together at the end of 2007, the income threshold is $17,500 if both are under age 65 and $19,600 if both are age 65 or older.

Go here for a more complete listing.

There are, however, exceptions. If you’re self-employed, you’ll need to file a tax return if your net earnings, basically your profit after expenses, exceed $400 a year. The idea here is not just to get you to pay income taxes, but self-employment, or Social Security taxes as well.

You should also file if you are eligible for the Earned Income Tax Credit, intended to help workers with low incomes. Depending on your income and the number of children you have, the credit can reduce or even eliminate your income tax bill and possibly still generate a refund. See this article.

And even if you’re not required to file, the IRS advises you to do so if you worked and federal income tax was withheld. That’s so you can recover the withholding tax. It’s yours, so take it.

Also, the filing rules for children and students up to age 24 are different. To learn them, see this article on the “kiddie tax.”

However, if you are supposed to file a return, and you don’t, it could cost you. If you can’t make the full payment, you’re still better off filing a return. The penalty for “failure to file” is 5 percent per month up to 25 percent of the tax your return indicates you owe. By contrast, the penalty for “failure to pay” your taxes is considerably less, ½ percent per month up to a maximum of 25 percent of the amount owing.

Your responsibility for filing a return will, at some point, cease. The IRS says that upon your demise, it’s up to your survivors to decide if you should file one last time. And that, of course, is determined by whether you’d already met the annual filing requirements.