Direct deposit refund without a hitch

Susan Tompor
Susan Tompor

Direct deposit sounds like a no-brainer when it comes to getting a tax refund.

But it’s not foolproof. Ever think about what happens if you enter the wrong account number? Or if somehow that refund is deposited into someone else’s bank account?

“It may not happen very often, but when it happens to you, it’s a very big deal,” said Steve Kenneally, vice president of the American Bankers Association.

The IRS warned taxpayers this year that listing incorrect bank account information is a key, and common, error to avoid. Other common errors include: Not signing the forms, giving the wrong Social Security numbers, spelling a dependent’s name wrong (or in a different way than it shows up on the person’s Social Security card.)

Give the IRS the wrong bank account number? Unfortunately, there is not a way to change a direct deposit account number after electronically filing that return.

If you spot trouble immediately, you might have a chance at stopping the direct deposit. If the tax return has not already posted to its system, you can ask the IRS to stop the direct deposit by calling 800-829-1040 from 7 a.m. to 7 p.m. weekdays.

The bank isn’t required to match the name on the account to the account number. In some cases, the bank might refuse the direct deposit. But in many cases, it goes to the account number provided, Kenneally said.

Direct deposit is promoted as a way to avoid waiting a long time for a tax refund and stop thieves who go through mailboxes and steal tax refund checks.

Avoiding a direct deposit glitch is far easier than trying to correct a problem afterward.

“I had one client a few years ago where I entered the wrong account number,” said Frank St. Onge, enrolled agent for Total Financial Planning in suburban Detroit.

The tax refund ended up ultimately being sent by mail from the IRS, after the bank returned the money to the IRS noting that this was not the correct account.

“That has made me be very sensitive to checking the numbers for the bank routing number and account number for any refund on a tax return,” St. Onge said.

A direct deposit of a tax refund can be rejected upfront in some cases, such as if three direct deposits of tax refunds have already been made to the same account or prepaid debit card in the same year.

To find your refund go to “Where’s My Refund?” at within 24 hours after the IRS received your e-filed return or four weeks after mailing in a tax return.

The IRS notes that if you incorrectly enter an account or routing number that belongs to someone else and your financial institution deposits the money into someone else’s account, you must work with the bank to recover your money.

If you contact the bank and two weeks have passed with no results, file Form 3911 “Tax Statement Regarding Refund” with the IRS if the refund check is lost or if there has been trouble receiving the refund money.

Typically, you can get a tax refund within 21 days. But the IRS has warned online that taxpayers should not count on getting a refund by a certain date.

First thing before filing that return: Double check the bank account information involving direct deposit, so you don’t contribute needlessly to any delays.

Susan Tompor is the personal finance columnist for the Detroit Free Press.