When you finish your tax return and are due a refund, the Internal Revenue Service gives you the option of having it direct deposited into a bank account if your enter the routing and account numbers for it. Depending on the circumstances, you might be able to have your tax refund deposited directly into your husband's account. But before you enter your husband's account information, you may want to know some of the drawbacks of doing so.
Accounts Eligible for Refund Direct Deposit
Whichever account you choose to direct deposit your tax refund into, the financial institution has to be set up to receive electronic payments. This can be a checking or savings account, a 401(k), as well as other tax-advantaged accounts, such as a health savings or a Coverdell account you open to save for future school expenses. The IRS allows you to have the refund sent to any of these types of accounts, as well as others, that are in your husband's name. You can also have it sent to a joint account in both of your names, but only if you file a joint return.
When Your Husband Has Outstanding Debts
If you file a joint return and your husband has certain types of outstanding debts, your joint refund may be intercepted by one of his creditors -- meaning the direct deposit might not ever happen. Federal law allows tax refunds and other payments made by the U.S. government to pay outstanding child support, debts owed to the U.S. government, unpaid state and local income taxes, plus any unemployment compensation paid out by a state government that's required to be returned. Therefore, if your husband has one or more of these outstanding debts and the creditors follow certain procedures, the IRS will have no choice but to give your joint tax refund to the creditor. But even if your husband has other consumer debts or court judgments against him, the refund is at risk even after the deposit is made if any of his creditors are able to levy, or freeze, his bank account.
Protecting Your Refund with Form 8379
Having the tax refund deposited into your own account puts the funds out of reach of your husband's creditors that aren't eligible to take tax refunds directly from the IRS. However, this isn't a solution for creditors that can take tax refunds directly from the IRS. You can, however, file Form 8379 with your joint return to claim injured spouse relief. By filing Form 8379, the IRS may allocate a portion of the refund to you -- meaning only your husband's share can be used to pay off his debts.
Using Multiple Direct Deposits
Tax refunds can also be split up and direct deposited into a maximum of three different financial accounts if you enter the information for all accounts on Form 8888. If your husband consents to it, you can both agree on how much of the refund each of you will receive and have your portion deposited into an account you maintain in your name only. Again, this alternative only protects your share of the tax refund from creditors who may have access to your husband's bank account -- not creditors who can take the entire refund.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.