Refunds sent by mail are a popular target for check fraud
Widespread Mail Theft of Refund Checks
Taxpayer refund checks are being stolen from the mail, and in some cases, replacement checks are also being stolen.
Ashlea Ebeling with the Wall Street Journal interviewed Rep. Nicole Malliotakis (R., N.Y.) last October, she reported 218 cases totaling $3.8 million in stolen checks, with amounts ranging from hundreds of dollars to $500,000.
One taxpayer had to request four refund checks, with the third one still missing after being stolen and fraudulently deposited.
Many Taxpayers Still Rely on Paper Checks
While over 90% of taxpayers use direct deposit for refunds, millions still prefer paper checks.
Nearly 10 million paper refund checks were issued by the IRS last year.
Some taxpayers opt for paper checks to avoid sharing banking information with the IRS.
There are also instances where a paper check is issued even when direct deposit was elected, such as when banking information fails validation.
Check Fraud is on the Rise
Refunds sent by mail have become a popular target for check fraud, as reported by the Treasury Department last year.
Once a taxpayer elects to receive a paper check, they cannot switch to direct deposit for that tax year, even in cases of theft or loss.
A technology fix allowing taxpayers to change their preference to direct deposit mid-year is in development but is still a few years away.
IRS Urging Direct Deposit for Refunds
IRS Commissioner Danny Werfel has repeatedly emphasized in public comments that direct deposit is the fastest and safest way to receive refunds.
The IRS and Treasury Department are under pressure from Congress to address the growing problem of stolen checks.
Lawmakers, including Rep. Malliotakis, are calling for stronger measures to prevent mail theft.
How to Get a Replacement Check
The IRS has a process in place to replace lost or stolen checks.
Married couples filing jointly must fill out a taxpayer statement form and mail or fax it to the IRS to initiate a refund trace.
Individuals can call the IRS directly to request a trace.
The Treasury Department’s Bureau of Fiscal Service verifies the claim and issues a new check, typically within 30 days, although the process can take up to three or four months.
Combating Mail Theft and Fraud
The Treasury’s Financial Crimes Enforcement Network has issued alerts about a nationwide rise in mail theft-related check fraud.
Criminals are being prosecuted, with recent cases resulting in prison sentences for individuals involved in large-scale refund check theft.
In one case, two New York men were sentenced for stealing a $2.9 million IRS refund check.
Upcoming IRS Technology Upgrades
The IRS is modernizing its core systems, with a significant upgrade planned to roll out next year.
Future updates will allow taxpayers to use an online dashboard to manage refund preferences and upload forms, eliminating the need for faxing.
As IRS Commissioner Werfel notes, the modernization process requires careful planning to ensure effectiveness.
Bottom Line: Choose Direct Deposit
With refund checks increasingly becoming a target for fraud, the safest way to receive a refund is through direct deposit. While the IRS is working on improvements, taxpayers should act now to protect their refunds from theft.
Mark Sullivan Consulting assists taxpayers who have fallen victim to refund fraud, providing expert guidance through the IRS refund replacement process. Our team will navigate the complexities of filing refund traces, working with the Treasury Department, and ensuring your case is handled promptly. With years of experience in federal tax controversy, we are dedicated to securing the refunds our clients rightfully deserve while protecting them from further fraud risks. Let us advocate on your behalf and restore your peace of mind.
Request a free consultation HERE with Mark W. Sullivan, EA .
About the author
Mark opened Mark Sullivan Consulting, PLLC in October 2022 after a decade of tax consulting in FinTech. He is fairly new to the Phoenix area having moved here from St. Louis, Missouri in July 2020.
Mark has over 30 years of experience, including several years with the IRS as a Revenue Officer and over 16 years as director at a firm that specialized in civil and criminal tax accounting, IRS representation and forensic accounting. He has been admitted as an expert witness for civil and criminal tax cases in both State and Federal courts. Since relocating to Arizona and returning to practice, he has concentrated on tax compliance and planning for individuals and businesses, advisory and representation services.
He has an unlimited licensed to practice as an Enrolled Agent nationwide and is a member of the National Association of Enrolled Agents.
A long-time Jeep enthusiast, Mark enjoys off-roading in his 2006 Jeep Wrangler LJ around the Southwest or wherever he goes on vacation.
Copyright 2025 Mark Sullivan Consulting, PLLC.
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
Additional references: "Millions of Dollars in Tax Refund Checks Are Getting Stolen", Ashlea Ebeling, The Wall Street Journal (October 4, 2024)
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