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This can occur when the IRS has deposited a tax refund to the bank's account, but the bank does not have an associated bank application on file and so is unable to process the refund. This is known as an Unpostable refund.

 

The bank has only a short period of time to hold unpostable ACH funds before they are required to return the refund. You must immediately contact the bank with information regarding the processing of these funds.

 

The following are scenarios in which this occurs:

Problem: Your client's federal e-file was rejected by the IRS, so the bank application was not transmitted to the bank. You then filed a paper return for the client without discarding the bank application, so the bank's RTN and DAN still show in the Routing and Account number section on page 2 of Form 1040. This caused the IRS to deposit the refund to the bank's account.

 

Solution: You must contact the bank to correct this problem.

Problem: Your client's federal e-file was accepted by the IRS, but the bank application was rejected.

 

Solution: You must fix the errors on the bank application, and then re-create and transmit the bank application as soon as possible, so the bank can process the refund.

Problem: Your client's federal e-file was rejected by the IRS, so the bank application was not transmitted to the bank. You then transmitted a State-Only e-file indicating a bank product, and the State-Only e-file was accepted. The state deposited the refund to the bank's account, but the bank does not have an associated bank application on file.

 

Solution: To correct this problem, you must correct and successfully transmit the federal return along with the associated bank application. Once the federal e-file is accepted, the EFC will transmit the bank application to the bank for processing.