In an effort to combat fraud and identity theft, new IRS procedures effective January 2015 will limit the number of refunds electronically deposited into a single financial account or pre-paid debit card to three.
The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer.
While this will most likely not affect a great number of taxpayers, it may affect families in which the parent’s and children’s refunds are deposited into a family-held bank account. If you fall into this situation, you may need to make other deposit arrangements or just receive a paper check from the IRS. The largest difference between a direct deposit and a paper check is the timing of when the refund is received with the paper check possibly taking an additional 3-4 weeks to be received.
The new limitation also will protect taxpayers from preparers who obtain payment for their tax preparation services by depositing part or all of their clients’ refunds into the preparers’ own bank accounts, which is actually a violation of tax preparer rules under the Internal Revenue Code.