IRS Notice CP53E and the Rise of Refund-Related Scams

As the tax filing season winds down, fraud schemes often shift along with it. One recent example involves notices that appear to come from the IRS, including Notice CP53E. Because this notice references refund delivery and banking details, it can create unnecessary concern and prompt taxpayers to act too quickly. A measured response is the best safeguard. The IRS Taxpayer Advocate Service has also cautioned taxpayers to be careful with these notices and has explained that if a CP53E is received by mistake, such as when the return originally showed a balance due, it may be disregarded after confirming the account details. Before sharing information or making account changes, it is important to confirm whether the notice is legitimate and whether it applies to your return.

Understanding Notice CP53E

Notice CP53E is issued when the IRS is unable to complete a direct deposit because the banking information associated with a refund is missing, inaccurate, or rejected. This notice may feel especially new to taxpayers this year because a 2025 executive order directed the federal government to transition away from paper checks, including tax refunds, and toward electronic payments to the extent permitted by law. Although the notice itself may be valid, it is still unfamiliar to many taxpayers. That unfamiliarity, combined with the mention of refund processing, has made it a useful tool for scammers seeking to imitate official IRS correspondence.

  • It concerns a refund that would otherwise be sent by direct deposit.
  • It indicates the IRS could not process the deposit using the account information on file.

If the Notice Is Legitimate

When CP53E is legitimate, the IRS generally allows 30 days for the taxpayer to sign in to a secure IRS Online Account and correct the banking information associated with the refund. If no update is made during that period, the refund is typically reissued by paper check, which may take additional time to arrive. It is also important to note that IRS representatives cannot make this change by phone.

  • Banking changes cannot be completed by phone, text, or email.
  • Any update must be made through the taxpayer’s secure IRS Online Account.

Warning Signs of a Fraudulent Notice

Scammers often rely on urgency, unfamiliar terminology, and requests involving financial data. If a CP53E notice appears questionable, certain features may suggest it is not authentic.

  • A notice that asks you to verify, activate, or release a refund by scanning a code or clicking a link, especially if it prompts you to enter sensitive information. A QR code may appear on a legitimate notice, but it is still generally safer to go directly to IRS.gov by typing the address into your browser.
  • A request for banking information by phone, text message, or email. CP53E-related updates must be completed through the online account.
  • Language that is unusually urgent, threatening, or designed to pressure immediate action. A legitimate notice generally provides a response window of 30 days.

Practical Steps to Protect Yourself

If you receive an unexpected CP53E notice, pause before responding. The IRS does not request personal or banking information through unsolicited emails, text messages, phone calls, links, or QR codes. The following steps can help you evaluate the notice and reduce the risk of fraud.

  • Do not respond immediately to unexpected requests involving refund or banking information.
  • Access the IRS website by typing the address into your browser rather than scanning a code or following a link.
  • Review your filed return and IRS Online Account to confirm whether a refund is actually pending.
  • If no refund appears and none was expected, the notice may be disregarded.
  • Report suspicious phishing emails to phishing@irs.gov and consult IRS identity theft resources if you believe your information has been compromised.

If you are uncertain whether a CP53E notice is legitimate or how it relates to your return, don’t hesitate to reach out to your Scheffel Boyle CPA to set up a consultation. A careful review can prevent unnecessary account changes and help protect your financial information.

Potential Refund Deadline Extensions Under the Kwong Case

The Kwong case may provide taxpayers with an extended deadline for refunds.

A recent decision by the U.S. Court of Federal claims (Kwong vs. U.S.)  may give taxpayers an opportunity to recover or appeal penalties and interest related to the COVID disaster period.  The court decided in Kwong  that the declaration of the COVID disaster extended the deadline for many time-sensitive acts.  This includes payment and filing dates that fell within the covered disaster period.

The Kwong case involved a taxpayer with tax penalty and refund disputes.  The IRS determined that the deadline for the taxpayer’s claims was barred by the statute of limitations.  The taxpayer argued that the COVID disaster declaration extended the period to make a claim.  The court agreed and stated the following:

  • The start of the disaster period was January 20, 2020,
  • The end of the emergency declaration was May 11, 2023, and
  • The 60-day period following the end of the declaration ended on July 10, 2023

 

How the Kwong case affects other taxpayers

The Kwong case may have dealt with the specific refund claim within the COVID disaster declaration period, but a takeaway for other taxpayers is that any taxpayer (individual, trust, estate, business) with a claim for a refund of penalties or interest may be eligible for relief.  Some of the penalties and interest that may be eligible for relief include:

  • Late-filing penalties for returns filed after the original due date,
  • Late-payment penalties for taxes paid after the original due date,
  • Estimated tax penalties where quarterly payments were treated as late,
  • Potential penalties on certain international information returns,
  • Underpayment interest charged when tax was treated as unpaid, and
  • Interest tied to penalties that may not have been properly assessed

Eligible penalties and interest include those already paid and those subject to an ongoing dispute with the IRS.  Other time-sensitive acts that may qualify for the extended deadline include tax elections and amended returns.

The normal statute of limitations for making a claim for refund expires the later of three years from the filing of a return or two years from paying the tax.  The court’s decision in Kwong determined that a deadline falling between 1/20/20 and 7/10/23 was extended until 7/10/23.  This means that interest and penalties should not have accrued during these periods.  Penalties and interest already paid during this period may be eligible for refunds and penalties and interest subject to a dispute during this period may qualify for relief as well.  Taxpayers  have three years from 7/10/23 (60 days after the end of the emergency declaration) to make a claim for refund, meaning that taxpayers only have until 7/10/26 to file a claim.

 

Important caution

The IRS is expected to appeal the Court’s decision.  A successful appeal by the IRS would mean that penalties and interest during this period were validly assessed.  However, the timing of any IRS appeal will likely extend beyond the 7/10/26 deadline noted above.  In situations where a claim is contingent on the outcome of a case that is not decided by the statutory deadline, a protective claim may be filed to preserve a taxpayer’s rights.

If taxpayers file a valid protective refund claim by 7/10/26 and the IRS is unsuccessful in its appeal of the Kwong case, then the IRS would be required to refund eligible penalties and interest to taxpayers who made a timely protective claim even if that IRS appeal was not determined until after the 7/10/26 deadline.

 

Next Step

The next step for taxpayers is to review their tax history during this period and if applicable file a protective refund claim before 7/10/26.  Taxpayers may determine whether interest and/or penalties were paid by reviewing their tax returns and/or their IRS account transcripts.

This is a one-time opportunity unique to the COVID disaster period, but there is a short window to act and uncertainty as to a potential IRS appeal.

 

If you need assistance with a refund claim or understanding your possible eligibility, please reach out to us for help.