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Q.) An account holder’s IRS tax refund posted to the wrong account because she transposed two numbers when completing her Direct Deposit instructions on her taxes. Realizing after the fact what she had done, she contacted us to ask about her refund. We were able to confirm that the funds did post to the account number she mentioned. We can also see that the funds are still available. I would like to return the payment to the IRS but wonder if we will take on undue liability and if the transaction will be dishonored since it’s outside of the 2-day return window.
A.) An RDFI is permitted to rely solely on the account number in an ACH entry for posting purposes, and has no obligation to verify the name of the receiver in the entry matches the account number in the entry.
However, an RDFI that becomes aware of a misdirected credit payment from a government agency (i.e., the name in the ACH entry does not match the name on the account), is required to notify the government agency. A set of Frequently Asked Questions the IRS published on tax refunds explain the following:
- “If the RDFI learns that an IRS tax refund has been misdirected to the wrong account, the RDFI is required under 31 CFR Part 210 to notify the Government of the error.
- An RDFI can satisfy this requirement by returning the original ACH credit entry to IRS with an appropriate return reason code. Alternatively, if account information is incorrect but the payment can be posted to the correct account an RDFI may choose to originate a Notification of Change (NOC) with the correct account and/or routing and transit number.
- Although an RDFI is not liable for a misdirected IRS tax refund sent to the wrong account because of IRS or taxpayer error, the RDFI is encouraged after it becomes aware of the error to return those funds to the IRS if the funds are still available in the account.”
- The R03 return code (No Account/Unable to Locate Account) is appropriate for this scenario. See the 2021 Nacha Operating Rules & Guidelines, Table of Return Reason Codes, page OR 141.
- Please see the IRS Frequently Asked Questions on Tax Refunds for additional information:https://www.fiscal.treasury.gov/eft/faq-tax-refund.html
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