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Updated: Aug 03, 2023

What Happens if Your Bank Rejected Tax Refund?

Learn what happens to your tax refund when the bank rejects the direct deposit, possibly because the wrong account number was entered.
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Direct deposit is the fastest way to get your tax refund but it can turn into a headache if the IRS has the wrong information on file.

MyBankTracker breaks down what to do if your refund has gotten lost in the shuffle because of a direct deposit error.

April 15th is right around the corner and if your tax refund is late in arriving, the problem could lie with your bank account.

Entering the wrong routing or account number could significantly delay your refund or prevent it from reaching you at all.

What happens to your refund when you make a mistake with your bank account information really depends on the kind of error involved, and there are a few different ways it can play out.

Quick answer: Contact the IRS immediately and/or the bank that received your tax refund. If everything gets sorted out smoothly, you should expect a paper check in the mail instead of a direct deposit of your tax refund.

Consequences of entering the wrong direct deposit information

Once you submit your return with a refund due, the IRS will perform a validation check on the bank information you provide.

This just verifies that the numbers are complete, not whether they're accurate.

If you leave a number off, either on your account or routing number, you'd fail the validation check. In that scenario, the IRS would send you a paper check instead, which can take anywhere from six to eight weeks to be delivered.

If you enter the right amount of numbers but the digits themselves are incorrect, getting your refund back may be a little trickier.

Because you'd still be able to pass the validation check, the IRS would give the green light to release your refund to the bank. At this point, it would be up to the bank to decide what to do with the money.

The bank has the option of rejecting the deposit or accepting it. If it's rejected because the account information doesn't match the name on the check, it'll bounce back to the IRS.

Once the payment is returned, a paper check will be issued in its place. If the deposit is accepted, your refund will be deposited into whatever account is listed on your return.

Tip:  If a paper check is issued, it'll be sent to the last address the IRS has on file. If you've moved since filing your taxes, you'll need to fill out a change of address with the Post Office to make sure it's forwarded properly.

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Check your refund status

The IRS Where's My Refund? tool updates the status of your return every 24 hours and it allows you to track your refund prior to once your return is received.

If your return hasn't posted to the processing system yet, you can ask the IRS to stop your direct deposit by calling 1-800-829-1040.

Keep in mind that you won't be able to change the information you've already entered so you'll have to get a paper check.

When a lawsuit seems likely, you'll need to have detailed documentation of all your communications with the IRS and the bank concerning the error.

This includes copies of your return showing the direct deposit information, a copy of Form 3911 and anything you receive from the bank regarding the deposit.

The more evidence you have to show that the money was deposited in error, the better the odds of being able to win your case.