How New IRS Direct Deposit Rules Could Delay or Freeze Your Refund
Tax refunds are about 10% larger so far this year, but many filers will have to wait longer for their money due to the IRS phasing out paper checks.
As the 2026 filing season is now in full swing, some taxpayers may find their refunds temporarily delayed or even frozen due to changes in how the IRS delivers payments.
Under new rules, the tax agency is phasing out paper refund checks. As a result, refunds may be put on hold if a filer's direct deposit information is missing, incomplete, or rejected.
That is notable for a couple of reasons.
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According to the latest IRS reporting, taxpayers are seeing refunds run about 10% higher on average than this time last year. The average refund amount is just over $3,700, and that's likely due to changes in the Trump/GOP tax and spending bill enacted last year.
And…recent polls suggest that many plan to use that money to pay down debt or cover essentials.
For example, a survey conducted by Atomik Research and commissioned by Metro by T-Mobile finds that 59% of Americans plan to use their tax refund to pay off debt or cover core expenses like rent, utilities, or transportation costs.
So, what's happening with frozen or delayed refunds, and what should you do if you receive a letter from the IRS about it? Read on to learn more.
IRS sending direct deposit letters to more than 830,000 taxpayers
As Kiplinger has reported, the federal government, including the IRS, is moving away from paper checks as part of an initiative to modernize payment systems.
Data show that paper refund checks are more prone to loss, theft, or mail delays, while electronic deposits provide faster, safer, and more efficient transfer.
As a result, taxpayers who don't provide valid direct deposit information or whose banks reject the deposit may receive a formal notice instructing them to update their banking details.
These CP53E notices are part of the new verification process to help ensure that refunds are credited to the correct accounts.
- The IRS says that when you receive the CP53E notice, you have 30 days to update or add a new bank account.
- When you do, you should receive a message indicating your bank account update was successful.
- If you don't respond to the letter, the agency says it will issue a paper check after 6 weeks.
However, the Taxpayer Advocate Service (TAS) has indicated that taxpayers should take the notices seriously and respond promptly to avoid unnecessary delays.
Why are IRS refunds being delayed?
The IRS may temporarily hold your refund if the agency cannot successfully process a direct deposit. This can happen when:
- The taxpayer didn't provide direct deposit information when filing
- The bank rejects the deposit due to an incorrect routing or account number
In any case, the IRS will issue a letter asking you to update your direct deposit information through your IRS online account.
Though, as mentioned, you usually have 30 days to respond. And yes, if you fail to respond, the IRS may eventually issue a paper check, but the process can take additional weeks.
Who's impacted by the direct deposit change?
Most taxpayers won't see major delays. The IRS reports that roughly 36.5 million refunds have already been processed so far this tax season.
However, certain people are more likely to be affected, including:
- Taxpayers who historically relied on paper checks
- Individuals who don't have a bank account or have left the direct deposit section blank
- Those who entered incorrect banking information on their returns
Also worth noting: Some taxpayers remain exempt from the electronic requirement, like certain international filers, minors, incarcerated individuals, and decedents’ estates.
IRS refund delays draw scrutiny from lawmakers
More recently, concerns about IRS processes have also drawn scrutiny on Capitol Hill.
Congressional Democrats on the House Ways and Means Committee said the agency has sent notices to nearly a million taxpayers whose refunds were delayed because they didn't include direct deposit information.
In a March 9 letter to Treasury Secretary Scott Bessent and IRS leadership, lawmakers warned the notices leave affected filers with few options to quickly receive their money, in some cases forcing them to wait 10 weeks or longer for a paper check.
They also called on the agency to explain why the notices were issued so broadly and to improve the process for taxpayers to provide or update direct deposit details to avoid similar delays in the future.
"Having reviewed the IRS notice and called the IRS phone lines, we learned that there is no simple process for these taxpayers to request an immediate release of their refund by paper check without waiting at least 10 weeks," the Democratic Lawmakers wrote.
"Effectively, the President, unilaterally through his Executive Order, is causing undue hardship on millions of Americans by delaying their paper refunds for months," lawmakers added.
IRS direct deposit letter: Bottom line
Larger tax refunds for some so far this year reflect the 2025 Trump/GOP tax legislation, which expanded deductions and other benefits for many taxpayers. While those changes are welcome news for some households, new IRS direct deposit rules and verification letters can be confusing.
Keep in mind that the IRS will only request banking information via official letters mailed, not by phone, text, or email.
If you receive a letter, update your direct deposit information through their IRS Online Account as instructed to get your refund as quickly as possible.
If you haven't filed yet, double-checking routing and account numbers before submitting your return can help prevent errors and processing delays.
This article has been updated to mention a letter from House lawmakers to Treasury Secretary Bessent.
Read More
- Tax Season is Here: Big changes to Know Before You File
- IRS Phasing Out Paper Checks: What it Means for You
- IRS Tax Refund Schedule: When Will Your Check Arrive?
