Beware Different Names on ACH Tax Refunds Posted by AVCU on 11:02 AM

CUNA Mutual Group is warning credit unions to be on the alert with tax preparer accounts at credit unions. In some reported cases, credit unions receive tax refunds via ACH from the IRS but the payee name does not match the name on the tax preparer’s account. Under such circumstances, the credit union is not required to return the ACH item to the IRS, even if a reclamation notice is received.

Another fraud involves persons claiming to be tax preparers obtaining names and social security numbers to create tax returns. The tax refunds are set up for ACH direct deposit to the credit union and the credit union member. The member account receiving the ACH direct deposit was recently opened, or a joint owner was added to an existing account. Once the tax refund (ACH credit) is deposited into the member’s account, the tax preparer withdraws the funds.

If the credit union becomes aware that an agency has originated an ACH credit entry to an account that is not owned by the payee (whose name appears in the ACH payment entry), the credit union should promptly notify the IRS.

If the credit union is the RDFI and the funds from the ACH direct deposit received from the IRS have already been withdrawn from the member’s account, the credit union should not return the funds nor comply with the reclamation request from the IRS. The IRS warrants the liability.