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IRSThe Internal Revenue Service will limit the number of refunds that can be electronically deposited to a financial account of pre-paid debit card. The New IRS procedures limiting the number to three take effect in January 2015 as part of an effort to combat fraud and identity theft.

Starting with the fourth, refunds will automatically convert to a paper check and be mailed to taxpayers. Taxpayers will also be notified they have exceeded direct deposit limits and will receive the check in about four weeks if there are no other issues with the return.

The limit applies to financial accounts, such as bank savings or checking accounts, and to prepaid, reloadable cards or debit cards. However, the limitation may affect taxpayers, such as families in which the parent's and children's refunds are deposited into a family-held bank account. Taxpayers in this situation should make other deposit arrangements or expect to receive paper refund checks.

The IRS said the new regulation will protect taxpayers from preparers who obtain payment for preparation services by depositing all or part of client refunds into the preparer's bank account. Direct deposits can be made only to accounts bearing the taxpayers name.

Last modified on Wednesday, 16 July 2014
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