You can return an overpayment or mistaken refund to the IRS by check, electronic transfer, or through your tax return the following year
If the IRS sent you a refund you should not have received—because of a filing error, duplicate payment, or a mistake in their processing—you have several ways to send the money back. The method you choose depends on how quickly you want to return it and whether you have already filed your next tax return. The IRS does not charge a penalty for returning money, but they do charge interest on refunds they determine were paid in error, starting from the date they issued the refund.
The fastest route is a check mailed directly to the IRS, which takes about two weeks to process once they receive it. If you want to move the money electronically, you can use the IRS's payment system, though this requires setting up an account and takes a few business days. The slowest but simplest option is to claim the overpayment as income on your next tax return and let it reduce your refund or increase what you owe.
Key Takeaways
- Interest accrues on mistaken refunds from the date the IRS issued them, so returning money sooner costs you less in interest charges.
- A check mailed to the IRS Submission Processing Center in your region takes about two weeks to clear once received, and you should include a note explaining why you are returning it.
- The IRS payment system (IRS.gov/payments) lets you transfer money electronically, but requires you to set up an account and takes three to five business days to post.
- If you do not return the money before filing your next return, you can report the overpayment as income and reduce your refund or increase your tax bill by that amount.
Mailing a check to the IRS Submission Processing Center
The most straightforward method is to write a check payable to "United States Treasury" and mail it to the IRS Submission Processing Center that serves your state. The IRS maintains separate processing centers by region, and sending your check to the wrong one delays it by weeks. You can find the correct address on IRS.gov by searching for "IRS Submission Processing Center" and your state, or by calling 1-800-829-1040 and asking the representative which center handles your location.
Include a letter with your check that states your full name, Social Security number, the tax year the refund was for, and a brief explanation of why you are returning it—for example, "I received a refund for tax year 2023 in error and am returning it." Do not include the check stub or any other IRS correspondence; a straightforward typed or handwritten note is sufficient. Mail the check and letter together in an envelope, and keep a copy of your letter and a photo of the front and back of the check for your records.
Processing takes about two weeks after the IRS receives your check. You will not receive a receipt or confirmation in the mail, but the payment will appear in your IRS account online within 24 hours of posting. You can verify this by logging into your IRS account at IRS.gov/account and checking your payment history.
Using the IRS electronic payment system
If you want to return the money without writing a check, you can use the IRS payment system at IRS.gov/payments. This system is designed for paying taxes owed, but you can also use it to send a refund back by entering a negative amount or by contacting the IRS directly to process an overpayment return. The electronic method takes three to five business days to post and costs nothing.
To use the system, you will need to create or log into an IRS online account using your Social Security number, date of birth, and filing status. Once logged in, select "Make a Payment" and choose the tax year and type of return the refund relates to. You can pay by bank transfer (ACH), debit card, or credit card. If you pay by debit card or credit card, a processor fee applies—typically 1.87 to 2.35 percent of the amount—which you will need to pay separately. Bank transfer has no fee.
After you submit the payment, the IRS will send you a confirmation number by email. Write down this number and keep it with your records. The payment will show in your IRS account within one business day, though it may take up to five days to fully post to your account.
Reporting the overpayment on your next tax return
If you do not return the refund before you file your next tax return, you can report it as income received in the year you got it. This reduces your refund or increases the amount you owe for the year you file. For example, if you received a $2,000 mistaken refund in 2023 and do not return it, you would report $2,000 as "other income" on your 2023 return when you file in 2024.
To do this, add the refund amount to your total income on line 21 of Form 1040 (or the equivalent line on your state return). Include a note with your return explaining that this is a returned federal refund. When you file, the IRS will match this income against the refund they issued and adjust your account accordingly. This method is slower because you have to wait until the next filing season, and you will still owe interest on the original refund amount.
This option is useful if you have already spent the money and cannot return it when ready, or if you are filing your return anyway and want to handle the correction in one step. However, it does not stop interest from accruing on the original refund, so you will end up paying more in interest than if you returned the money sooner.
What happens if you do not return the money
If you keep a refund the IRS later determines was issued in error, they will charge interest on the amount from the date they issued the refund. The interest rate changes quarterly and is based on the federal short-term rate plus 3 percent. For 2024, the rate is 8 percent per year, but this varies by quarter and by year. The IRS will send you a notice explaining the interest owed, and you will have the option to pay it or dispute the information.
The IRS can also offset the refund against any taxes you owe in future years. For example, if you owe $500 on your 2024 return and the IRS is trying to recover a $2,000 mistaken refund from 2023, they can explore your 2024 refund toward the $2,000 debt. This happens automatically and you will see the offset explained on your notice.
In rare cases, if the IRS believes the error was intentional or part of fraud, they may pursue collection action or refer the matter to the Treasury Inspector General for investigation. This is uncommon for straightforward processing errors, but it is possible if the circumstances suggest deliberate misrepresentation.
Contacting the IRS if you are unsure about the refund
Before you return the money, confirm with the IRS that the refund was actually issued in error. Sometimes the IRS issues a refund that looks wrong but is actually correct—for example, if you received a refund after claiming a large deduction or credit you were may have access to to. Call the IRS at 1-800-829-1040 and have your Social Security number, the tax year in question, and the refund amount ready. A representative can tell you whether the refund was correct or a mistake.
If you filed your return through a tax preparer or software, contact them first. They may have made an error in your return that caused the IRS to issue an unexpected refund, and they can advise you on whether returning it is necessary. If the error was their mistake, they may offer to handle the correction or refund process for you.
Interest and penalties on returned refunds
The IRS charges interest on refunds determined to be paid in error, but does not charge a penalty for returning the money late or for the mistake itself. Interest accrues from the date the IRS issued the refund to the date you return it or the date the IRS adjusts your account. The longer you wait to return the money, the more interest accumulates.
If you return the refund within a few weeks, the interest will be minimal—often less than $10 for a $1,000 refund. If you wait several months or a year, the interest can be substantial. For this reason, returning the money as soon as you discover the error is the most cost-effective option.
Frequently Asked Questions
Do I have to return a refund if I am not sure whether it was a mistake?
No. Call the IRS at 1-800-829-1040 and ask them to review your return and explain why the refund was issued. If they confirm it was correct, you can keep it. If they confirm it was an error, they will eventually contact you about it, and you will owe interest from the date of issuance.
What if I already spent the money and cannot return it right now?
You can report the refund as income on your next tax return, which will reduce your refund or increase what you owe. This does not stop interest from accruing, but it handles the correction when you file. If the IRS contacts you before then, you can set up a payment plan to return the money over time.
How long does it take the IRS to notice a mistaken refund if I do not return it?
This varies. Some errors are caught during processing and the IRS contacts you within weeks. Others may not be discovered for months or years, especially if the error was small or involved a complex return. The longer it takes them to notice, the more interest accumulates.
Can I return part of the refund and keep the rest?
Only if you can document that part of the refund was correct and part was an error. For example, if you received $3,000 but were may have access to to $1,000, you can return $2,000. You will need to provide the IRS with an explanation of which portion was incorrect and why. Contact the IRS before returning a partial amount to confirm they agree with your calculation.
Will returning the refund affect my tax record or future refunds?
No. Returning a mistaken refund does not create a penalty or flag on your account. Future refunds are processed normally. The IRS will straightforward adjust your account to reflect the correction and close the matter.