Help! My Tax Refund Deposited Into the Wrong Account!
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80% of Americans get their tax refund direct deposited into their bank account. It’s the easiest, quickest, and safest way to get your tax refund. But what if you gave the IRS the wrong routing and bank account number, or if the account they have on file for you is now closed?
In 2021, the average taxpayer received a refund of $2,863. Imagine getting that much money deposited into the wrong account after you’ve already planned for it to go to your emergency fund, pay off debt, or purchase a new car. The IRS assumes no responsibility for tax preparer or taxpayer error when it comes to this sort of thing, you’re basically on your own. Don’t fret, there are ways to resolve this issue and ensure you get your refund in your account.
Common Tax Refund Deposit Mistakes
Forgetting a digit in the account or routing number of a bank account
Transposing a digit in the account or routing number of a bank account that doesn’t exist
Inadvertently entering an account or routing number that belongs to someone else
How to Fix an Incorrectly Deposited Tax Refund
Fixing the mistake of a tax refund going into the wrong bank account will depend on the reason for the mistake in the first place. let’s go through the reasons stated previous and I’ll tell you exactly what to do to correct it.
Forgetting a Digit in the Account or Routing Number of a Bank Account
Whenever you submit your tax return and request to have your funds direct deposited, the IRS performs a validation check. A validation check is when they verify that the information you entered is complete, not accurate, complete. If you forget to enter a digit in the account or routing number of a bank account and the deposit doesn't pass the IRS's validation check, the IRS will send you a paper check for the entire refund instead of a direct deposit.
Transposing a Digit in the Account or Routing Number of a Bank Account That Doesn’t Exist
Since the validation check simply verifies if the numbers are complete, transposing a number will definitely pass the validation check. This means that the IRS will not automatically issue your refund as a check. However, what they will do heavily depends on what the bank does with the deposit. In this case, if you transposed a number for your bank account and the account doesn’t exist with your bank, the bank will reject the deposit and return it to the IRS. If this happens, the IRS will issue a paper check for the amount of that deposit once they receive it back.
Inadvertently Entering an Account or Routing Number That Belongs to Someone Else
This scenario is similar to the previous one where the numbers for the bank account are complete so it passes the validation check, but the difference is that the account doesn’t belong to you. If the bank account exists with your bank but belongs to someone else, the bank will deposit those funds into that other person’s account. This means that the refund will not be sent back to the IRS and you will not automatically receive a refund via paper check.
If this happens or if you know this will happen due to giving the wrong bank information, here’s what you do. Track your refund with the IRS Where’s My Refund tracker tool. If the return hasn't already posted to the system, contact the IRS and ask them to stop the direct deposit. You can call them toll-free, Monday - Friday from 7:00am - 7:00pm at 800-829-1040.
If the refund has already been sent, you would need to contact your bank and let them know of the error. It would be extremely helpful to give them all of the information you have; the total amount of the refund, the date it was deposited, as well as the incorrect account number. If the bank can locate the funds ask if they can deposit it int your bank account. This may be a long shot, but they may do it. If they say no, simply ask them to reject the funds and send it back to the IRS. If the funds are returned to the IRS, the IRS will send a paper refund check to your last known address on file.
If the bank is giving you a hard time and has not resolved the problem within 2 weeks, you would need to file Form 3911, Taxpayer Statement Regarding Refund to initiate a trace. This form allows the IRS to contact the bank on your behalf to attempt recovery of your refund. Banks are allowed up to 90 days from the date of the initial trace input to respond to their request for information. Here’s the thing, if funds aren't available or the bank refuses to return the funds, the IRS cannot make them do so. You would then have to file a civil against your bank or the owner of the bank account where your refund was deposited.
Filing a civil case could cost you a lot of money in legal fees. You should consult with an attorney to determine if it’s worth filing a case at all. The legal fees could outweigh the refund amount making it not worth the effort of fighting.
How to Change Direct Deposit Information for Your Tax Refund
If you have outdated or incorrect direct deposit information you may be able to change it before you meet any of the scenarios above. The ability to change your direct deposit information is based on whether or not you have completed your return and submitted to the IRS and whether or not they accepted it.
If the IRS accepted your return, for security reasons, they will not be able to change your direct deposit information on file. You’d have to wait for the bank to reject the deposit and send it back to the IRS and they will issue you a paper check to your last known address on file.
If you have not submitted your return, you want to contact them directly at 800-829-1040 Monday - Friday from 7:00am - 7:00pm to update your banking information for direct deposit.
Final Thoughts
I know we all think we know better, but mistakes happen. Filing your taxes can be extremely stressful even if you aren’t preparing them yourself, so things can happen. Now you know exactly what to do in case you’re faced with any of thee situations. Direct deposit is still the best way to receive your refund, just make sure you’re super careful of the information you or your tax preparer enters.
