Triple, Quadruple Check Your Direct Deposit Information

Every year taxpayers delay their tax refunds, and in some cases lose their refunds altogether, due to incorrect direct deposit information. Unlike other information on the tax return (such as W-2s and bank interest), the IRS does not cross-check bank account information. The agency assumes you know what your bank account numbers are, and they will send the refund to the account indicated on your tax return.

But sometimes that information is wrong. Often a person will transpose numbers, or use their ATM debit card number instead of their bank account number. Even worse, tax preparers can transpose numbers too. This has happened to me, so I'm not saying I'm perfect. But I know from experience and my own research that it's downright difficult for taxpayers to get their money back even in simple scenarios where the refund is deposited into a nonexistent account. And the IRS is either unable or unwilling to help.

This situation is truly heartbreaking, as a recent story by Key Bell at Don't Mess with Taxes recounts. Ms. Bell tells the story of an innocent taxpayer whose refund was accidentally deposited into the wrong bank account because the tax preparer entered his bank information incorrectly. Even worse, this account where the money was deposited was an actual, existing bank account that belonged to someone else. You can just imagine how the rest of the story will unfold.

The practice I have adopted for myself and my clients is to triple check the bank routing and account numbers. If I ever have even the slightest doubt about the bank information, I have the taxpayer receive a paper check in the mail. The idea here is that the IRS has more security procedures to track and enforce a check than they do to track and enforce a direct deposit, and so I want my clients to be as fully protected as possible. I hope other tax professionals will adopt similar practices, because protecting our clients' refunds should be our number one priority.

If you are the unfortunate victim of having your refund deposited to another bank account, here's the seven steps you can take to get your refund back:

1. Find the bank. (It's the bank matching the bank routing number showing on your tax return.)
2. Talk to the ACH manager at the bank. (You might need to call around or talk to several people before finding this person.)
3. Persuade the bank to sent the refund back to the IRS. (Easier said than done, but most bank will be willing to help you out.)
4. Contact the IRS and explain that the bank will be sending back the refund. (It doesn't hurt to keep the IRS in the loop so they can put notes related to your refund in their computer system.)
5. Ask the IRS agent to fill out a Taxpayer Advocate Service Request (Form 911) to route your case to the taxpayer advocate.
6. When the Advocate contacts you, explain that you want this incident added to their annual report as a direct deposit error.
7. In the future, always get a check, unless you are 100% sure that your bank info is absolutely 100% correct.