Expecting a big tax refund? One missing detail could freeze your money for weeks

Thanks to new changes in the tax law caused by 2025’s One Big Beautiful Bill — specifically with regard to new deductions for tipped and overtime income — the U.S. Treasury Department expects many taxpayers to receive refunds this year.

“The bill was passed in July [and many] working Americans didn’t change their withholding, so they’re going to be getting very large refunds in the first quarter,” Treasury Secretary Scott Bessent said in a December interview broadcast on NBC10. “So I think we’re going to see $100 [billion]-$150 billion of refunds, which could be between $1,000 to $2,000 per household.”

Sounds great. But be careful. If you’re in line to get your tax refund, you better make sure you’re prepared to share your bank account information with the Internal Revenue Service. Otherwise you could experience significant delays.

A new IRS rule that affects 2025 tax returns is now requiring taxpayers to provide their bank account and routing numbers to receive refunds timely via direct deposit.

The IRS will still process individual income tax returns (Form 1040 series) filed without bank account information. However, the agency will temporarily freeze the refund until the taxpayer provides direct-deposit information or requests a paper check. More importantly, if incorrect bank account information is submitted, the IRS will freeze those direct deposits until the issue is resolved.

“Many taxpayers haven’t fully grasped that shift yet,” said Mitchell Gerstein, a senior tax adviser at Isdaner & Company in Bala Cynwyd. “If you are hesitant to share bank information with the IRS, we explain that electronic payments are now the default.”

Some may not feel comfortable sharing their bank information with the government, and ultimately providing this information is voluntary. But, according to Philadelphia CPA Jacob Cohen, not doing so will create headaches and delays.

“If a taxpayer does not want to share the information, their refund will take longer to process and the IRS will still attempt to collect banking information before they issue a refund check,” he said. “The refund could be delayed several weeks at a minimum, but likely longer.”

Not everyone will be affected by this rule. The IRS says international taxpayers, minors, prisoners, taxpayers with religious exceptions, and decedent taxpayers will receive paper check refunds as in the past.

And the IRS will still be making payments by check for now for those who request it. But they do plan on phasing out that ability in the coming years.

“If you do not have an account, we’d recommend setting up a basic no-fee checking account in person at a reputable bank, or even online with certain banks like Ally Bank or Discover Bank," Cohen said. The IRS offers the ability to split your refund into up to three accounts for retirement, savings, and checking.

There are other options for those without bank accounts.

Treasury does offer alternative options such as prepaid debit cards, credit cards, or approved digital wallets such as PayPal, says Gerstein. Many reloadable prepaid cards like Netspend and Bluebird provide a routing and account number that you can use for direct deposit.

Make sure to check with your mobile app provider or financial institution to confirm which numbers to use.

The IRS also recommends visiting the FDIC website or using the National Credit Union Administration‘s Credit Union Locator Tool to find a bank or credit union and how to choose the right account for you. If you are a veteran, you can use the Veterans Benefits Banking Program (VBBP) for access to financial services at participating banks

If you decide to go fully digital, Philadelphia CPA David Lopez recommends setting up your online account and also creating an account on ID.me. This program is used by several government and non-government agencies and allows you to track the status of your tax refund.

“For the IRS, you can use the ID.me platform to review your tax documents for the past seven years, run reports on your income and wages, and obtain tax documents that you may have displaced,” he said. Users can see “if you owe, if you have a refund, and [can] even make payments in installments if needed.”

Typical refunds are processed within 21 days for an e-filed return and six weeks or more if sent by mail, according to the IRS. Refunds will take even longer if corrections are needed or bank information isn’t included. Where’s My Refund will have the latest information on your return.

Gerstein says the real benefit for both individuals and businesses is faster, more secure refunds and fewer lost checks with an immediate payment confirmation. Most accounting experts say that the IRS does process refunds via direct deposit faster than by check and that it’s the quickest way to do business with the agency.

“Our advice is simple,” he said. “Set up an IRS online account, double-check your bank routing and account numbers, and don’t ignore IRS letters.