February 13, 2025 - Dishonored Checks Led to Erroneous Refunds

An IRS computer programming problem resulted in over $43 million in erroneous refunds being issued to the accounts of 7,765 individual taxpayers whose checks were dishonored, the Treasury Inspector General for Tax Administration (TIGTA) has found. The overpayments occurred when the taxpayer's check was posted to their account before the financial institution honored (paid) it.

Although IRS employees are supposed to review any accounts with dishonored payments, TIGTA found overpayments are still being sent out to those taxpayers. After reviewing 20 of the affected taxpayer accounts, the IRS determined the refunds were posted to the accounts before the system confirmed the checks were paid. Through further analysis, the IRS located a timing issue in the software and agreed to postpone issuing refunds for two posting cycles to allow for the receipt of any information on the unpaid items. TIGTA recommended the same procedural change to avoid future issues, given that the IRS processed over 1.5 million unpaid checks totaling almost $4.7 billion from Jan. 1, 2023, through March 28, 2024.