To indicate where tax refunds should be sent.
To show how much interest you have earned over the years.
To use as additional forms of identification.
To show how much money you have paid in taxes.
The correct answer for “Why is it useful to have your bank account and routing numbers when using tax preparation software” is “to indicate where tax refunds should be sent”. Let us now get into the specifics of why this is the case. However, before that, we should learn what bank account and routing numbers are.
What are Routing and Bank Account Numbers?
Your personal bank account can be recognized by a unique collection of numbers known as your bank account number. It works similarly to your account’s “address” inside the banking system. And as for the Routing Numbers, it is a specific sequence of numbers that defines your bank and helps financial organizations in correctly routing transactions. It is similar to your bank’s “address” in the banking system.
How to Find Bank Account and Routing Numbers?
Now you know what Bank Account and Routing numbers are, let’s see how you can find them. You can find your Bank Account on your checks. Also, you can find it on your online banking account or call your bank directly.
Routing Numbers on the other hand are also available on your checks. It’s the nine-digit number on the check’s bottom-left corner. If you are unsure, you can look up your bank’s website or call customer care.
Reasons Why You Should Have Bank Account and Routing Number when Using Tax Software
Providing your bank account and routing details while using tax preparation software has a specific purpose: it indicates where tax refunds should be delivered. Here are the reasons why:
Direct Deposit Tax Refund
When you file your income tax return and the government finds that you are qualified for a tax refund, they owe you money. People used to get paper cheques in the mail at their home addresses as their refunds. Nowadays, you can receive a refund by direct deposit into your bank account which is way faster.
Once you have inputted your bank account as well as routing number when filing your tax return through the software, the rest of the steps are mostly done automatically. The authorities will process the refund digitally and you will receive a notification when the refund has reached your account.
Secure and Convenient
Since there is no chance that a physical check may be misplaced, stolen, or delayed in the mail, direct deposit appears to be a lot safer than receiving one. Moreover, because the money is sent straight into your account, you will not have to worry about going to the bank to physically deposit the cheque.
Faster Refund Process
By entering your bank account and routing information, you allow the IRS to deposit your return straight into your account. It is far better than waiting for a paper check to come in the mail. Direct deposit allows you to get your return in a matter of days, however, paper checks might take weeks to arrive and clear on your doorsteps.
Less Error and Delays
The chance for error significantly gets reduced when you file your tax return through tax preparation software including your bank account and routing number. This also reduces the chances of error in the refund process and getting the refund quicker without any delays.
When you choose the direct deposit method you lower the need for documentation as well as manual cheque processing. Nowadays many people consider this method as more eco-friendly and totally digital.
Typical Mistakes to Avoid When Inputting Routing and Bank Account Numbers
People make common errors when entering the information in their Tax preparation software, you need to avoid these errors as it can delay the whole procedure. Here are some of them:
- Transposing numbers is a typical error in which you swap the locations of digits in a bank account or routing number unintentionally. For example, inputting “12345” instead of “13245” could lead to processing issues.
- Adding extra numbers or missing digits is another common issue. You will need to make sure that you have entered all the number as it is.
- Many people get confused between routing and bank account number which is on the cheque. If you are not sure which is which you can contact your bank personnel and get the correct information.
The correct choice for the question “Why is it useful to have your bank account and routing numbers when using tax preparation software?” is quite simple, which is “to show where tax refunds need to be sent”. To understand why it is, read the whole explanation given above.