San Francisco Tax Preparation / CPA: IRS Releases Final Regulations on Recovery of Misdirected Direct Deposit Refund

Filed in CCH NEWS FEED by on February 1, 2021

The IRS has released final regulations with the procedures under Code Sec. 6402(n) for identification and recovery of a misdirected direct deposit refund. This guidance reflects modifications to the law made by the Taxpayer First Act ( P.L. 116-25). The final regulations affect taxpayers who have made a claim for refund, requested the refund be issued as a direct deposit, but did not receive a refund in the account designated on the refund claim.


On December 23, 2019, the Treasury Department and the IRS published proposed regulations ( NPRM-REG-116163-19) providing the procedures under Code Sec. 6402(n) for reporting, identification, and recovery of a misdirected direct deposit refund. One comment on the proposed regulations was received. After consideration of the comments, the IRS adopts the proposed regulations as final regulations with minor modifications.

The final regulations clarify that the offset or setoff of an overpayment occurs prior to the issuance of a direct deposit. The IRS will determine if a reported missing refund is setoff or offset as part of the procedure for the identification of the account that received the misdirected direct deposit refund.

Applicability Date

These regulations are effective on December 22, 2020, the date they are to be published in the Federal Register. The regulations apply to reports to the IRS made after December 22, 2020, that a taxpayer never received a direct deposit refund.

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