By Michelle Price and Anirban Sen
WASHINGTON (Reuters) - Millions of pandemic stimulus payments have been deposited in incorrect customer accounts due to an Internal Revenue Service error, according to Intuit TurboTax, which is helping to distribute the payments.
Two banking industry sources confirmed the error, which will delay distribution of the badly needed aid.
"For those who don't receive a direct deposit, they should watch their mail for either a paper check or a prepaid debit card," the IRS said in a notice on Thursday.
Intuit TurboTax tweeted on Wednesday: "Unfortunately, because of an IRS error, millions of payments were sent to the wrong accounts and some may not have received their stimulus payment."
The IRS did not immediately return a call seeking comment.
One of the sources said the IRS used old information for millions of accounts that are thought to be closed or inactive. Banks are working with the IRS to return and re-route the rejected payments to the correct accounts, but it is not clear how long this process will take, the person said.
The Treasury Department began processing a second round of emergency payments on Dec. 29 as part of a new congressional COVID-19 aid package. As with the first round distributed in April, millions of payments were to be directly deposited by Jan. 4 in customer accounts the IRS had on file.
"The IRS determines where second stimulus payments were sent, and in some cases, money was sent to a different account than the first stimulus payment last spring," Tweeted H&R Block, another tax preparation company helping to distribute payments.
Rejected deposits are likely to be reissued as paper checks, although the IRS may also instruct taxpayers to file their 2020 tax return to claim their payment, the person said.
(Reporting by Michelle Price; Additional reporting by Anirban Sen in Bengaluru; Editing by Dan Grebler)