IRS Sending Refund by Mail Despite Direct Deposit Setup - Why? 971 Code on Transcript

This happens more often than you'd think! 😅 The IRS has several automatic triggers that can override your direct deposit election. The most common reasons are: 1) If you've received more than three direct deposits in a single tax year (this is an anti-fraud measure) 2) If there was a slight mismatch between the name on your tax return and the name on your bank account 3) If your financial institution rejected the deposit attempt for any reason The 971 code means they've generated a notice explaining WHY they're sending a paper check. These notices typically take 5-7 business days to show up in your mailbox, which explains why you don't see it in your online account yet. The system updates the transcript before actually generating the physical mail.

Did you use a tax preparer or software that takes their fee out of your refund? According to IRS Publication 1345 (Rev. 1-2023), when refund transfer products are used where the preparer's fee is deducted, the IRS may issue a paper check instead of direct deposit. This is especially true if the temporary account used for the fee extraction had any issues.

I went through this EXACT thing last year. Triple-checked my banking info, had gotten direct deposits for years, then suddenly got a paper check with no explanation. Called the IRS for three days straight - busy signals, disconnects, and hours on hold. Finally used Claimyr (https://youtu.be/_kiP6q8DX5c) and got through to an agent in about 15 minutes. They explained that my bank had actually rejected the deposit attempt due to a name mismatch (I had gotten married and changed my name with the IRS but not yet with my bank). The agent was able to tell me exactly when the check was mailed and confirmed it was on the way. Saved me so much anxiety wondering if it was lost or if there was a bigger problem. I'm always super prepared with documentation, but sometimes you just need to talk to an actual human at the IRS.

Be careful about this situation. I had something similar happen last year, and it turned out someone had gained access to my IRS online account and changed my direct deposit information. The IRS security team caught it and reverted to a paper check for safety, but I had to go through identity verification afterwards. Check your IRS account login history in the security settings to make sure there's no suspicious activity. The IRS transcript codes might not tell the whole story if there's a fraud investigation happening.

Have you verified if any of your previous tax years had unresolved issues? I've seen cases where the IRS switched to paper checks on April 12th, 2023 and February 28th, 2024 when there were outstanding questions about prior year returns. Sometimes they want physical confirmation of your address before sending money if there's anything unusual in your filing history.

OMG I just went through this exact thing!!! I was SO confused and worried when I saw they were mailing a check! 😱 I checked my bank info like 10 times thinking I made a mistake! Turns out my bank had merged with another bank in January and even though my account number stayed the same, the routing number technically changed (even though both old and new were still working). The IRS system flagged this as a potential issue and defaulted to sending a check instead. The good news is my check arrived pretty quickly - only took about 7 days from when the WMR tool updated to show it was being mailed. So hopefully yours comes fast too! I was shocked by how efficient they were with the paper check after all my worrying!

Here's what you need to do now: Step 1: Wait for the notice that corresponds with the 971 code. This will explain why they switched to a paper check. Don't take any action until you have this information. Step 2: Check your mailbox daily. Paper checks are typically mailed within 7-10 business days after the 971 code appears. Step 3: If you don't receive the check within 4 weeks, call the IRS at 800-829-1040 to request a payment trace. Step 4: For next year, consider filing early in the season and double-check that your bank account name exactly matches your tax return name. Step 5: If you need to update your bank information with the IRS for future payments, use Form 8822 or update it through your online account. This is a fairly routine issue and doesn't indicate any problems with your return itself.

I work as a tax preparer and see this situation frequently during filing season. One thing that hasn't been mentioned yet is that the IRS also switches to paper checks if there's any discrepancy in the Social Security number verification process with the Social Security Administration. This can happen even if your SSN is correct on your return - sometimes there are temporary delays in the SSA database updates. Another common cause is if you've moved recently and there's a mismatch between your current address and what your bank has on file. The IRS cross-references this information as part of their fraud prevention measures. The 971 notice should arrive within the next few days and will give you the specific reason. In the meantime, you can also try calling the Taxpayer Advocate Service at 877-777-4778 if you have a financial hardship situation that requires the refund urgently. They sometimes can expedite the process or provide more detailed information about the delay.