In its latest attempt to fight tax refund fraud, the
IRS said that, beginning in January 2015, it will
impose a limit of three electronic direct deposits
of tax refunds into a single financial account or
prepaid debit card. Taxpayers who exceed the limit
will receive the fourth and subsequent refunds in a
paper check instead of a direct deposit.
Taxpayers who request more than three direct
deposits to one account will receive a notice of the
change, be told they can expect a refund check in
about four weeks, and be able to track the status of
the refund on the IRS’s “Where’s
My Refund?” site.
The new limit is intended to prevent criminals from
easily obtaining multiple refunds. It is also
intended to stop tax return preparers from obtaining
payment for their tax return preparation services by
depositing all or part of a taxpayer’s refund into
the preparer’s own bank account.
In 2012, the Treasury Inspector General for Tax
Administration recommended that the IRS limit the
number of refunds that can be deposited in the same
account and presented evidence that some accounts
were receiving large numbers of deposits that the
IRS had not detected (TIGTA
Rep’t No. 2012-42-080).
The IRS at that time expressed a concern about the
effect a direct-deposit limit would have on
taxpayers with legitimate multiple-person accounts
but agreed to work with Treasury’s Financial
Management Service (now the Bureau of the Fiscal
Service) to determine whether limits were feasible.
announcing the change, the IRS pointed out that
direct deposits must be made to accounts bearing the
taxpayer’s name and that tax preparers are not
permitted to obtain payment of their fees by
submitting a joint Form 8888, Allocation
of Refund (Including Savings Bond Purchases),
to split the refund with taxpayers and are also
prohibited from opening joint bank accounts with
taxpayers. Preparers who do so are subject to IRS
The IRS believes most taxpayers will not be affected
by the new rule, but acknowledges that a few will,
such as those who may have a single family bank
account into which all of the family members’
refunds are deposited. These taxpayers will have to
make other arrangements or expect to receive paper
Journal of Accountantcy
For additional information on how we can
help, please contact
Robert Puerto, CPA,
at 516-248-7361, or
click here to email Robert.
In a brief consultation he can assess your situation
and offer guidance for your specific circumstances.