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06.29.20

Receive an IRS refund in error. Should you keep it?

BY Nixon Peabody Income Tax Team

If you receive an erroneous refund from the IRS, those funds should be returned as soon as possible. Depending on how the refund was received, there are different steps you should take to accomplish this.

If you receive a paper check and have not yet cashed the check, the following steps should be taken:

  • In the endorsement section on the back of the check write "Void"
  • Send the check back to the proper IRS location within 21 days
  • Include a brief explanation for the reason you are returning the refund

If you receive a paper check and have already cashed the check, the following steps should be taken:

  • Send a personal check, money order, etc. to the proper IRS location within 21 days
  • Include on the check: Payment of Erroneous Refund, the tax year of the refund being issued, and your taxpayer identification number
  • Include a brief explanation for the reason you are returning the refund
  • There may be interest due to the IRS if repaying in this manner

If you receive the refund through a direct deposit, the following steps should be taken:

  • Contact the ACH department of your financial institution and instruct them to return the refund to the IRS
  • Call the IRS at 800-829-1040 (individual) or 800-829-4933 (business) to provide an explanation for the reason you are returning the refund
  • There may be interest due to the IRS if repaying in this manner