What It Means When Your Bank Rejects Your Refund and Sends It Back

For most taxpayers watching their transcript, seeing TC 846 — Refund Issued is the moment of celebration. But in rare and frustrating cases, that joy turns into panic when a new code appears:

TC 841 — Refund Reversal

This code means the refund that was issued has bounced back to the IRS — usually because the bank refused the deposit. This puts the funds back into the U.S. Treasury and resets the payment process entirely.

TC 841 is one of the most alarming codes to see, but understanding why it happens — and what to do next — helps you get the refund re-issued properly.

What TC 841 Actually Means

TC 841 indicates a reversal of a refund payment, meaning:

• The IRS issued the refund
• The IRS attempted to deposit it
• The bank rejected it
• The funds were sent back to the Treasury
• A new method of issuance must occur

In nearly every case, the IRS will re-issue the refund as a paper check once TC 841 posts.

Why the Bank Rejects a Refund

Refund deposits are rejected for several common reasons:

1. Incorrect bank account number

Even one digit wrong causes failure.

2. Invalid routing number

This often happens with closed or merged banks.

3. Bank account is not in the taxpayer’s name

Examples:

• Using a spouse’s separate account
• Using a friend’s account
• Using a tax preparer’s account
• Depositing into a business account for a personal refund

Banks return deposits if the names don’t match.

4. Bank flags deposit as suspicious

Refund amounts can trigger fraud protections.

5. Dormant or closed account

If the account was inactive or under review.

6. Refund deposited into a prepaid card that does not accept government ACH

Some prepaid products limit deposit types.

How TC 846 and TC 841 Work Together

The typical pattern is:

• TC 846 — Refund Issued
• IRS sends refund
• Deposit fails
• Bank rejects funds
• TC 841 — Refund Reversed posts
• Refund amount re-appears as credit in IRS system

From this point, the IRS determines the next step.

What Happens After TC 841

Once the refund returns to the IRS, the standard path is:

• The IRS switches to paper check issuance
• Address on file is used
• Check is mailed to taxpayer

This can take:

• 2–6 weeks for re-issuance
• Longer during peak tax season

Will a New TC 846 Appear?

Often yes — but it will represent the paper check issuance, not the original deposit attempt.

The sequence might be:

• TC 841 — Refund reversed
• TC 846 — Refund re-issued (Check)

But if the address needs updating or the IRS requires verification, additional holds may occur.

What You Should Do If You See TC 841

1. Confirm your mailing address

Because your refund is now coming via check.

2. Do not attempt another filing

Your original return is still valid.

3. Do not request direct deposit again

The IRS will default to paper for security reasons.

4. Consider calling the IRS ONLY IF

• More than 6 weeks pass with no movement
• You see additional unclear transcript codes
• You receive a mailed notice requesting clarification

Preventing Future TC 841 Issues

To avoid this painful delay:

• Always use a bank account in your name
• Double-check routing/account numbers
• Avoid third-party or borrowed accounts
• Do not use tax preparer-owned bank accounts
• If using prepaid cards, ensure they accept government ACH deposits

Rare Scenario: Split Deposits

If a taxpayer attempts to split refunds using Form 8888, and one deposit fails, the IRS may:

• convert the entire refund to a paper check
  or
• partially issue and partially reverse

Double-splitting refunds increases TC 841 risk.

TC 841 doesn’t mean the IRS took your refund away. It means:

• The refund was issued
• The bank rejected it
• The money is safely back in the Treasury
• A paper check will follow

While frustrating, this is ultimately a fraud-prevention safeguard — ensuring refunds go to the correct taxpayer.