The IRS first offered direct deposit of your tax refund check in 1987. But until now, you could only get your refund deposited into one account. This year, the IRS launched a new initiative that allows you to divide your refund between up to three separate checking or savings accounts and three separate financial institutions.

Why is that a big deal? Because for most folks, the one account into which their refund was deposited was a checking account. I don't know about yours, but my checking account seems to have more drains (bills, mostly) and leaks (banking fees and odd charges) than a plumber's nightmare. It's hardly the place for emergency savings, a retirement nest egg, or contributions to my children's college funds.

With the new split option, I can choose to divvy up my refund into two or even three parcels, and they don't have to be equal. For example, if Uncle Sam is going to return $2,423 of my hard-earned dollars (the average refund amount last year), I could have $500 deposited in a checking account to cover the latest mechanic bill for the family's aging Honda Civic, $673 sent to a savings account to build up an emergency fund, and the remaining $1,250 poured into an IRA. Once it's out of sight, I'm far less likely to fritter it away or let it be consumed by day-to-day concerns.

There are limitations, to be sure. Here are some of the biggies:

  • Any invalid or incorrect routing numbers or account numbers can create major headaches, including, but not limited to, the IRS writing a single check for the full amount and sending it to you -- or the IRS depositing your check in someone else's account (in which case you must work directly with the bank to try and recover the funds).
  • Tax payers who use electronic filing through TurboTax or H&R Block will not be able to use the split-refund option this year. If you file a paper return with H&R Block, however, you will be able to exercise the split-refund option. It just may take a little longer to get your money.
  • If you want to deposit part of your refund into an IRA, you'll have to be careful not to exceed the contribution limit and also to notify your financial institution in advance to indicate whether the contribution is for 2006 or 2007. (Otherwise, your financial institution is likely to assume it's for 2007.)

Still interested in splitting your direct-deposit refund between two or three different accounts? You may also want to check with your financial institutions for any specific requirements or restrictions they may have. For example, some banks may not allow you to deposit a refund from a joint return into an individual account. Others may limit the types of savings accounts into which you can make direct deposits.

Last, but not least, you'll need to complete the IRS' Form 8888, Direct Deposit of Refund to More Than One Account, to include with your return.

This article is adapted from the Motley Fool Green Light "Money Answers" archive, which features more than 100 articles on personal-finance topics ranging from taxes to credit to beginning investing, organized by subject and life stage. For access to this content -- plus the current newsletter, back issues, members-only discussion boards, and advisor blogs -- take a free 30-day trial today!

Fool contributor Elizabeth Brokamp is a licensed professional counselor with a special interest in Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter.