Returning an IRS Erroneous Refund

 Returning an IRS Erroneous Refund

Sometimes taxpayers may receive the erroneous refund by IRS’s mistake. The “erroneous refund” is the refund you are not entitled to at all or for an amount more than you are entitled to. If you receive the erroneous refund, you have the legal obligation to repay the amount to the IRS. And the sooner the better – holding onto the money for too long could result in the need to pay interest or penalties. For example, millions of stimulus checks were sent out to the unqualified taxpayers (nonresident aliens) by mistake, and the taxpayers are required to return the payments immediately to the IRS.

If your refund was a paper Treasury check and has not been cashed, you should write “Void” in the endorsement section on the back of the check and attach a note stating, “Return of erroneous refund check”. Then you should submit the check immediately but no later than 21 days to the appropriate IRS location.

If your refund was a paper Treasury check and has been cashed, you should submit a personal check, money order, etc., immediately, but no later than 21 days, to the appropriate IRS location. Please note that cashing an erroneous refund check may result in interest due the IRS.

If your refund was a direct deposit, you should contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS. You should also call the IRS to explain why the direct deposit is being returned. Interest may accrue on the erroneous refund.

When the amount of the refund (paper check or direct deposit) is different than what was expected, indicating the IRS changed the amount, a notice explaining the adjustment is mailed to your address of record. Please review the information in the notice to determine if the change to the refund is correct. You can also call the IRS in case you require further assistance.

Reference:

https://www.irs.gov/taxtopics/tc161