TAP 04-003

Electronic Deposit of Form 1040X Refund

Statement of Issue:

Form 1040 (U.S. Individual Income Tax Return) allows a taxpayer to direct his/her refund directly into a bank account that the taxpayer identifies on the form by routing and account numbers. Currently, Form 1040X (Amended U.S. Individual Income Tax Return) does not allow direct deposit of a refund.

Proposal:

Form 1040X should be changed to allow direct deposit of any refund to the taxpayer’s account identified by routing and account number.

On February 23, 2004, TAP received a response from Wage and Investment, Submissions Processing (also attached) endorsing the proposal, noting it would alleviate taxpayer burden and provide a faster means for taxpayers to receive their refunds. The response also observed that implementation of the recommendation would require several different organizations within the IRS to coordinate efforts and that it “may be feasible and more cost effective to provide business requirements for direct deposit on Forms 1040X as part of a Modernization project rather than make substantial changes to the current processing environment.” Therefore, we are re-directing our recommendation to you with the request that you undertake it as a Modernization project.

Response Notes:

12/04/2003 Karen Hill forwarded to Barbara A. Ritz, Senior Operations Advisor responded she is researching whether the change can be done as part of the processing of the refund rather than a change in forms. 12/23/2003 Received response from Tom L. Allen promised by 1/7/2004 Pamela J. Walker, Chief, IMF Branch sent a position paper to Ruth Jeansonne 1/12/2004, Sottile asked Jeansonne to confirm if this would be the final response. The position paper addresses the barriers IRS has in implementing the change including computer programming changes, form changes, and that it is currently an open issue with the Treasury Inspector General for Tax Administration. (TIGTA). The TIGTA audit addresses the risks associated when IRS employees have access to direct deposit account information.

W&I Submission Processing endorsed the proposal but noted that implementation will require a coordinated effort within several different IRS organizations and consideration of the risks associated when IRS employees have access to direct deposit account information.

On February 23, 2004, TAP received a response from Wage and Investment, Submissions Processing (also attached) endorsing the proposal, noting it would alleviate taxpayer burden and provide a faster means for taxpayers to receive their refunds. The response also observed that implementation of the recommendation would require several different organizations within the IRS to coordinate efforts and that it “may be feasible and more cost effective to provide business requirements for direct deposit on Forms 1040X as part of a Modernization project rather than make substantial changes to the current processing environment.” Therefore, we are re-directing our recommendation to you with the request that you undertake it as a Modernization project.