A system change from the Internal Revenue Service could catch many taxpayers off guard this tax season. The IRS is shifting further toward direct deposits as the primary way to issue refunds, reducing reliance on traditional paper cheques.
The change is part of a broader effort by the IRS and the US Treasury Department to modernise payments and streamline processing. However, for many taxpayers, the shift could create unexpected delays if banking details are incorrect or missing. Incorrect bank information could temporarily freeze refunds, something many filers may not realise until it happens.
When One Wrong Number Triggers a Freeze
The change is simple in theory but may be frustrating in practice. If a taxpayer submits incorrect bank details, the refund may not automatically convert into a paper cheque as it often did in the past. Previously, the IRS frequently issued a paper cheque if a direct deposit failed. Under the updated system, refunds may instead be frozen temporarily while the issue is reviewed.
Taxpayers who enter incorrect routing numbers, closed accounts, or incomplete banking information could see their refunds held until they take action or the process moves forward manually. This delay could be especially frustrating for households that rely on refunds for savings or essential expenses.
The CP53E Notice and the Ticking Clock
When a refund is frozen due to banking issues, the IRS sends a CP53E notice explaining the problem. This notice gives taxpayers 30 days to correct their bank details through their IRS online account. If taxpayers respond within that window, the refund can be processed faster. However, if no action is taken within 30 days, the IRS will eventually issue a paper cheque.
That cheque may arrive about six weeks after the notice date, meaning refunds could be delayed until late spring or longer in some cases. Because of this timeline, taxpayers may feel as if their refund has been suspended, especially if they are unaware of the notice.
Why the IRS Is Making This Change
The shift reflects the IRS’s broader move toward digital payments. Direct deposits are generally faster, more secure, and cheaper to process than paper cheques. By prioritising electronic refunds, the agency aims to reduce fraud risks, lower costs, and speed up overall tax administration. However, transitions like this can create friction for taxpayers who are not aware of the updated procedures.
How Taxpayers Can Avoid Long Delays
Taxpayers can avoid refund freezes by preparing carefully before filing. Filers should double-check their bank account and routing numbers before submitting their tax returns. Even a small mistake could lead to significant delays.
After filing, taxpayers should monitor their IRS online account regularly for any notices. If a CP53E notice arrives, responding quickly is key to preventing extended delays. Taking these simple steps can help ensure refunds arrive on time and prevent unnecessary complications during tax season.
Originally published on IBTimes UK
