Teens & Taxes: Does Your Teenager Need a Bank Account To Receive a Tax Refund?

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Just like adults, working teens who paid more taxes than they needed to in 2021 may be entitled to a tax refund. Whether your teen is expecting money back from the IRS or facing a tax bill they will need to pay, it helps for to have their own bank account for direct deposit — or direct debit — of the funds.

Learn: Teens & Taxes: How Much Can Your Teen Make Before Needing to File Taxes?
Explore: Gen Z and Millennials Favor National and Online Banks, Survey Shows — What Does That Mean for the Future of Credit Unions?

The IRS has urged taxpayers to sign up for direct deposit of their tax refund in order to expedite their payment. Setting up direct deposit of their tax refund enables your teen to divide the money into as many as three different accounts, including an account for investments in U.S. savings bonds. Just like an adult, your teen may want to set some of the money aside for savings and splurge on something they’ve wanted with a portion of their tax refund. If your teen has an Individual Retirement Account, they can have all or some of their money deposited into that IRA account.

Make Your Money Work

It’s especially important for your teen to set up their own bank account if they are expecting a refund, because, according to the IRS, you cannot direct your refund into someone else’s checking or savings account, including a parent or guardian. That means if your teenager doesn’t have a bank account or another means to accept the money, they could be stuck waiting for a paper check from the IRS.

Tax Refund Delays: New Laws, Backlogs and Fewer Employees Could Force Setbacks

The IRS noted that funds may also be directed deposited on or into:

  • Some prepaid debit cards (as long as the card has a routing and account number)
  • Some mobile apps, including the Cash App

However, setting your teenager up with a bank account in anticipation of a tax refund offers the most flexibility to split payments between checking and savings, or withdrawing the cash to spend.

As the IRS noted in a news release on January 22, 2022, filing electronically and using direct deposit is the fastest, easiest and most secure way for anyone to get their tax refund. Currently, 80% of all taxpayers use direct deposit for their federal tax refunds.

Make Your Money Work

See: Teens & Taxes: Quick Tips for First-Time Filers (and Their Parents)
Find: 6 Best Retirement Investing Strategies for Gen Z Workers

While your teen does not absolutely need a bank account if they are getting a tax refund, it’s a good idea to help get them started on the path to responsible financial management.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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