Invest your tax refund in your IRA the easy way

This year, in an effort to encourage you to save, the IRS is allowing taxpayers to have their refunds deposited in up to three accounts including IRAs. If this sounds appealing, you'll want to pay close attention to the rules that apply. As Forbes reports, while the government’s intent is good, there are a few kinks that could cause you some headaches:

• "The IRS must deposit your refund into your IRA by April 17, 2007--the tax-filing deadline this year--for it to count as a 2006 contribution. If the money doesn't get into the account by April 17 it will become a 2007 contribution instead...and you’ll miss out on the 2006 break"
  
  
• "Some people are eligible to deduct their IRA contributions for 2006 even though you make your IRA deposit in 2007. If you're one of them and the money gets into the account late, than you'll have to go back and amend your 2006 return.
  
  
• "You have to make sure you get the routing and account numbers correct. And you have to check off the appropriate box on the IRS form indicating whether the money is going into a checking or savings account. So which is an IRA? That depends. IRA accounts held at Fidelity are checking accounts, but other custodians consider their IRAs to be savings accounts. So you must call your bank, mutual fund, brokerage house or credit union and ask."
  
  
• "You as the taxpayer must tell the custodian by April 17 that you want that money counted as a 2006 contribution. Otherwise, the custodian will assume direct deposit is for the current (2007) tax year.
  
  
• "If your refund is changed because you made a math error or the government grabbed part of it (say to pay child support) that could change the amount going into your IRA."