IRS freezes refund over missing bank information

The IRS is on a President Trump mandated mission to eliminate paper checks. It wants all taxpayers to receive their refunds by direct deposit or other electronic payment methods, not by paper check.

For most taxpayers, this is not a big deal. Ninety-three percent of all taxpayers already receive their refunds by direct deposit.

But some 5.6 million American households are unbanked-they don’t have a checking or savings account. The transition to direct deposit is proving difficult for many of them, and the IRS is not going out of its way to help.

To have their tax refunds paid by direct deposit, taxpayers must provide their bank routing and account numbers on their Form 1040. Technically, providing such direct deposit information is voluntary. The IRS processes tax returns that lack this information.

Until this year, the IRS automatically issued a paper refund check to taxpayers who failed to provide bank information or whose deposit was rejected by the bank. But starting with the 2026 filing season, the IRS is temporarily freezing the refunds of all such taxpayers and sending them a CP53E notice.

The CP53E is a computer-generated, one-page, not very informative “informational” notice that tells taxpayers they have 30 days to provide correct direct deposit information using their IRS online account. It is not a penalty notice and imposes no additional interest or monetary sanctions. CP53E notices have been issued to 1 percent of all taxpayers – over one million of them.

If a taxpayer who receives a CP53E notice does not provide direct deposit information within 30 days, the IRS will issue a paper check after six weeks. Thus, there could be a delay of ten weeks before such taxpayers receive their refunds.

The IRS is required to pay interest on refunds delayed by more than 45 days from the date of filing, so presumably these taxpayers will be paid interest on their refunds.