Q: Deposits into Closed Accounts. What should a financial institution do if an Economic Impact payment is direct deposited to an account that is closed?
A: The payment must be returned. The Green Book, issued by the U.S. Department of Treasury’s Bureau of Fiscal Service, is a comprehensive guide for financial institutions that receive ACH payments from and send payments (i.e. collections) to the federal government. As the National Automated Clearing House Association (NACHA) notes in its “ACH Network Rules Pandemic-Related Frequently Asked Questions” (Updated April 16, 2020), according to the Green Book (page 4-2), if a U.S. Treasury payment is made to a closed account, the receiving depository financial institution (RDFI) should return the payment. The Green Book states in Chapter 4 that all ACH payments must be returned in accordance with the NACHA Operating Rules and Guidelines, including when an account is closed or does not exist. Most ACH returns to the IRS will result in a paper check being issued; therefore, RDFIs must make appropriate use of Return Reason Codes.
This Q&A was contained in the Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) – As of March 3, 2021 (which may be updated from time to time). This may be found on the FDIC’s website here: https://www.fdic.gov/Coronavirus/faq-fi.pdf.