Can a Tax Refund Be Wire-Transferred?

Federal income tax refunds can be wire-transferred directly to your bank account on a limited basis. Traditional wire transfers go from bank-to-bank, using domestic or foreign clearing houses as traffic managers only. Classic wire transfers are available for two primary situations. If you are working and living outside of the U.S., the IRS permits wire transfers to get refunds to you much faster and safer than internationally mailed checks. Should taxpayers, primarily businesses, have refunds equal to $1 million or more, the IRS also permits wire transfers.

Living Outside the U.S.

The IRS allows taxpayers living outside the U.S. to use foreign bank account wire transfers to receive tax refunds. Because of the extra time, up to 12 weeks or more, to receive paper checks and the increased risk of lost or stolen checks, the IRS permits domestic-to-foreign-bank wire transfers of refunds. Depending on bank policies and currency exchange issues, there might be wire transfer fees charged for this process.

Refunds of $1 Million or More

Taxpayers who qualify for large refunds of $1 million or more can also use wire transfers to safely, securely and quickly receive their funds. You must complete and file IRS Form 8302 if you or your business qualifies. Because this situation applies more frequently to corporations than individual taxpayers, few single or joint filers use this method. Individuals who qualify must file Form 1045, Application for Tentative Refund, along with Form 8302. Corporations must file Form 1139, Corporation Application for Tentative Refund, with Form 8302 to use wire transfers.

Wire Transfer and Tax Refund Issues

Tax refunds wired from domestic to foreign banks might incur fees from each financial institution involved. Taxpayers using a third-party firm to manage the wire transfer often incur another fee, payable to the intermediary firm. Taxpayers filing IRS Form 8302 also need to attach a blank check with the word "Void" or "Voided" written boldly across its face. As with most federal tax refunds, the IRS does not allow people to designate a person, other than the taxpayer, to receive a wire transfer of a refund.

FedWire

The IRS uses FedWire, directly connected to the Federal Reserve Bank, for its wire transfers of tax refunds. FedWire is a prime component of the Federal Reserve Communications System (FRCS). The government's Financial Management Service (FMS) uses FedWire to both disburse funds to and collect payments from taxpayers. FMS executes wire transfers using the Treasury Department's FedLine to transmit refunds through the FedWire system to taxpayers.

Additional Electronic Transfer Option

You can ask the IRS to send your refund as an Automated Clearing House (ACH) transaction. Because most U.S. taxpayers do not qualify for domestic or foreign wire transfers, this is a wonderful alternative. Unlike traditional wire transfers, which when initiated before early afternoon arrive in the receiving bank account the same day, ACHs from the IRS are credited to your account the next business day. Also, unlike wire transfers, these electronic transactions have no bank or transaction fees.

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