The Ledger: Modernizing Payments to and from America’s Bank Account
Rick Oelerich, LPA, EA
Senior Tax Manager
As a result of Executive Order 14247 the US Treasury is phasing out paper checks for tax refunds and tax payments. This will ultimately include payments made to the IRS for any amounts due. To learn more about refund options and timelines, visit https://www.irs.gov/refunds/about-refunds.
Payments – The IRS indicates they will continue to expand electronic payment options to make it easier, faster, and more secure for individuals and businesses to pay taxes. Until further notice, existing forms and procedures can be used to make payments to the IRS. To avoid delays, taxpayers should use existing electronic payment options. However, it is likely that IRS will officially stop taking checks in the near future, except in limited circumstances, in payment of tax debts.
Refunds – IRS recommends that taxpayers should consider direct deposit which will require:
- Providing valid bank account information (routing and account numbers) when filing your return.
- For those with no bank account, open an account at a bank or credit union if you do not already have one. Resources are available at FDIC.gov/GetBanked and MyCreditUnion.gov.
- Certain mobile apps and prepaid debit cards if they have a routing and account number can provide a solution to the direct deposit problem. You can check with your mobile app provider or financial institution to confirm which numbers to use.
Taxpayers without access to digital payment options may be eligible for Treasury-sponsored alternatives that ensure reliable electronic delivery. Additional details on these alternatives will be provided as implementation progresses.
CP53E – Refunds – When direct deposit banking information is incomplete or declined by the receiving bank CP53E is issued affording the taxpayer the opportunity to “correct” the missing or incorrect information. While the notice contains a phone number, it is only a recording, the number is for information only, no corrections or additions can be made to any direct deposit information using the phone number provided.
The one-page notice explains that the IRS could not process the taxpayer’s refund via direct deposit and instructs them to update their bank account information. Taxpayers can do that through their IRS online account, which the notice links to using both a URL and a QR code.
If the taxpayer does not have an online account one can be established by going to https://www.irs.gov/payments/online-account-for-individuals. This account can also be used to access information such as balance, record of prior payments, tax filing status and more. Once the taxpayer has an online account, they can use that to repair failed direct deposit activity, this must be done within 30 days of the date of the notice. Correction of incorrect banking information on the submitted return or the addition of a new bank account can be accomplished with the taxpayer’s online account. Be advised to enter banking information carefully as an individual has only one opportunity to correct any missing or incomplete information.
The steps that will need to be completed are as follows:
- Accessing or establishing your online account
- Once completed allow 2-5 days for your refund information to update online, the Where’s My Refund tool can be accessed also to check the refund status.
- If there is a systemic issue when accessing the taxpayer’s account carefully read the messaging, responding as directed. Attempt to access the account at a later time.
Be advised of the following:
Frozen Refunds for Missing Info – Returns filed without direct deposit information will still be accepted but will be temporarily frozen. The IRS will send a CP53E notice requesting banking information; if no action is taken within 30 days, a paper check will only be issued after a six-week delay or more.
Rejected Deposits – If a direct deposit is rejected by a bank, the IRS will not automatically reissue a check. Taxpayers must update their information via their IRS Online Account.
As IRS continues to attempt to comply with the Executive Order, elimination of ALL paper refunds is the current vision of the US Government. Like all IRS programs, the initial years of implementation are the most difficult, before submitting your tax return carefully review any bank information provided. It is probable that many refund checks may be delayed by 2-3 months.