IRS’ move away from paper checks has delayed tax refunds for nearly 1.5 million Americans
The tax agency announced earlier this year that, at the direction of a March executive order, it is phasing out paper checks and pushing taxpayers to use direct deposit to receive their refunds, with limited exceptions.
Paper checks have increasingly been vulnerable to fraud, and the federal government says that electronic payments are faster and cheaper.
Although most taxpayers already use direct deposit to get their refunds, millions of Americans still asked for a check from the IRS last tax year.
So far, the IRS has sent notices to nearly 1.5 million taxpayers asking them to add information for direct deposit or another form of electronic payment like a payment app, according to Reps. Danny Davis, D-Ill., and Terri Sewell, D-Ala., who have been pressing the IRS for information on the process. These taxpayers are facing potential refund delays of over two months.
Taxpayers who receive these notices from the IRS asking for direct deposit information have 30 days to provide bank account information, which requires taxpayers to pass identity checks powered by facial recognition to make an online account with the IRS. If the agency doesn’t hear back, it will issue a paper check six weeks later, meaning the delay can be over two months long. The IRS didn’t respond to a request for comment.
For low-income households, tax refunds can be a critical source of income. Most Americans have a bank account, but 5.6 million households were unbanked as of 2023. That rate is higher among low-income adults, as well as younger people, Black and Hispanic adults and people with disabilities. Rural and tribal communities lacking internet access and living far from bank branches, as well as elderly taxpayers, may also especially feel the government’s push to direct deposit.
People can also ask the IRS for exceptions from the electronic payment requirement, although the tax agency has not provided much information online about the exemption process, like who qualifies.
“There is no simple process for these taxpayers to request an immediate release of their refund by paper check without waiting at least 10 weeks,” Davis and Sewell wrote in a March 9 letter.
Last week, they followed up on their request for more materials from the IRS, saying that the tax agency had not given them the information they’d asked for, including a copy of the notice being sent to taxpayers who filed without bank information. The IRS sent an altered version, something the lawmakers called “an example of this administration trying to muddle information provided to Congress.”
The pair also wants the IRS to shorten its processing timeframes for those being sent the notice and to provide them with options other than the online IRS account to find a remedy. The phone number offered by the IRS on the notice doesn’t put callers in touch with a live agent, but instead connects callers with a recording telling them to set up an online account.
Other government agencies are also moving away from paper checks. Over the summer, the Social Security Administration warned claimants still receiving their benefits via paper checks that their payments could be disrupted.
]]>