What If I Put the Wrong Direct Deposit for My Tax Return?
Understand the automated process that occurs when a tax refund is sent to a wrong account and the correct steps for resolving the error to receive your funds.
Entering incorrect bank account information for a tax refund is a common error. After a tax return is filed and accepted by the Internal Revenue Service (IRS), the direct deposit details cannot be changed. This situation triggers specific procedures at both the financial institution and the IRS. The outcome depends on whether the account number was invalid or if it belonged to another active account.
Immediate Consequences of an Incorrect Account Number
If the Account is Invalid or Closed
The most frequent scenario involves entering an account or routing number that is incorrect, incomplete, or linked to a closed account. When the IRS attempts to send the refund, the Automated Clearing House (ACH) network will not find a matching, open account, and the financial institution will automatically reject the transaction.
Once rejected, the funds are returned to the IRS. This process can take several business days for the financial institution to process the rejection and for the IRS to receive the returned funds. This event automatically triggers a change in the refund delivery method, a process that requires no immediate action from the taxpayer.
If the Account is Valid but Belongs to Someone Else
A more complicated situation arises if the incorrect account and routing numbers you provided are valid and belong to another individual’s active account. In this case, the financial institution will likely accept the deposit. From the IRS’s perspective, the direct deposit was successfully delivered to the account specified on the tax return, and its obligation to issue the refund has been met.
The IRS does not have the authority to compel the bank or the other person to return the money. Recovering these funds becomes a civil matter between you, the financial institution, and potentially the person who received the money. You would need to contact the bank immediately to explain the error, but they are not legally obligated to assist.
The IRS Paper Check Issuance Process
When a financial institution rejects a direct deposit and returns the funds, the IRS automatically defaults to issuing a paper check. You do not need to contact the IRS to request this change; it is an automated part of their refund processing system. The check will be mailed to the address listed on your most recently filed tax return.
The timeline for receiving a paper check after a failed direct deposit can vary. It may take up to five business days for the bank to return the funds to the IRS. Once the IRS receives the returned refund, it can take several weeks to process and mail the paper check. You can monitor the status of this process using the “Where’s My Refund?” tool on the IRS website.
Given that the check will be sent to your address on file, it is important to ensure it is current. If you have moved since filing your return, you should update your address with the IRS as soon as possible. This can be done by submitting Form 8822, Change of Address, or by updating your information through your IRS online account.
How to Address a Missing Refund
It is important to understand that after your tax return is accepted, you cannot change your bank account information for that refund. Filing an amended return, Form 1040-X, will not correct a refund issue caused by incorrect bank details, as the original return must be fully processed first. If your refund does not arrive in a reasonable time, the official procedure is to initiate a refund trace.
A refund trace is the formal process the IRS uses to locate a missing refund. You can start a trace only if the “Where’s My Refund?” tool shows the refund was sent but you have not received it within the expected timeframe. For a direct deposit, you can initiate a trace if you do not receive your refund within five days of the deposit date. For a paper check, the waiting period is six weeks from the mailing date.
You can initiate the trace by calling the IRS Refund Hotline or by completing and mailing Form 3911, Taxpayer Statement Regarding Refund. If you filed a joint return, you cannot start a trace through the automated phone system; you must mail a completed Form 3911. You will need your Social Security Number, your filing status, and the exact refund amount shown on your tax return.
After you submit a refund trace request, the IRS will investigate the status of your refund. If the trace confirms the check was not cashed, a replacement check is issued, which takes about six weeks to arrive. If the investigation finds the refund was deposited into an active account due to your error, the IRS will contact the financial institution on your behalf as part of the trace process.
The bank is allowed up to 90 days to respond to the IRS inquiry. If the bank cannot or will not recover the funds, the issue may then become a civil matter you must pursue with the institution or the account holder.