Where’s my tax refund?

Tax season is in full swing, and while credit unions are gearing up to process tax return payments, the NAFCU Compliance team has received a number of questions on what to do when the name on a tax return ACH entry doesn’t exactly match the name on the account.

The National Automated Clearing House Association (NACHA) provides Operating Rules for ACH transfers, but unfortunately does not provide much guidance in the area of federal ACH transfers. While the general rule under the NACHA framework is that a receiving depository financial institutions (RDFI) has no basis to dispute the validity of an ACH Entry in the absence of a customer complaint (see, ACH Bulletin #1-2014), credit unions often make the business decision to reject and return an ACH entry when there is a mismatch in light of the omnipresent risk of fraud and identity theft.

A helpful “get out of jail free” resource for credit unions known as the Green Book provides guidelines for addressing federal ACH payments in these situations. Not to be confused with the Oscar winning film, the Treasury’s guide provides instructions for completing returns, noting that NACHA’s mandatory return rules and return reason codes still apply to federal ACH transfers. While I won’t get too into the weeds on all that it covers, I did want to mention the Treasury’s prohibition on placing a hold on federal ACH funds. Here is a brief excerpt from chapter 4 of the guide:


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