(UNITED STATES) — Democratic lawmakers are demanding transparency from the Internal Revenue Service (IRS) and the Department of the Treasury over refund backlogs tied to a controversial data-sharing agreement with Immigration and Customs Enforcement (ICE), as the federal government pushes taxpayers toward electronic payments.

Representative Danny Davis pressed Treasury Secretary Scott Bessent during a House Ways and Means Committee hearing on June 4, 2026, asking how many taxpayers are waiting on delayed refunds and why the delays have stretched on. Davis said older taxpayers and others without reliable access to electronic payment systems are being hit especially hard.

Senator Ron Wyden, the ranking Democrat on the Senate Finance Committee, escalated that pressure on June 8, 2026 after a watchdog report detailed flaws in how taxpayer data was shared with ICE. Wyden said officials who authorized unlawful disclosures should be held accountable.

At the center of the refund issue is Executive Order 14247, signed on March 25, 2025 and published in the Federal Register on March 28, 2025. The order set a government-wide shift to electronic federal payments and largely ended paper refund checks after September 30, 2025, except in limited hardship cases.

Taxpayers whose direct deposit information is missing, invalid, or rejected receive a CP53E notice. That notice freezes the refund and gives the taxpayer 30 days to provide banking details through an IRS Online Account. IRS guidance dated May 11, 2026 lays out that process.

By March 31, 2026, the agency had sent about 2.2 million CP53E notices, affecting about 1.7 million unique refunds. Democrats say the delays do not end when a taxpayer qualifies for a paper-check exception; in many cases, the wait can exceed 10 weeks.

⚠️ Note: As of March 31, 2026, the IRS had issued 2.2 million CP53E notices affecting 1.7 million unique refunds. Taxpayers who seek a paper-check exception may still face delays of more than 10 weeks.

✅ Affected taxpayers should know: A CP53E notice generally means the IRS could not complete direct deposit because banking information was missing, invalid, or rejected. The notice typically gives 30 days to update account details through an IRS Online Account, which may reduce further delay.

The refund dispute is intertwined with an April 2025 memorandum of understanding between the IRS and the Department of Homeland Security (DHS). That agreement allowed ICE to cross-check addresses against tax records for immigration enforcement, drawing immediate objections from taxpayer advocates and immigration groups.

Judge Colleen Kollar-Kotelly ruled on February 27, 2026 that the IRS violated federal law about 42,695 times by disclosing confidential taxpayer addresses to ICE. Her ruling sharpened questions about whether tax administration and immigration enforcement had been improperly merged.

A report released by the Treasury Inspector General for Tax Administration (TIGTA) on June 8, 2026 added new detail. TIGTA said ICE had not met required security standards before the data sharing began, and it found flaws in the IRS automated matching process that sent incorrect or incomplete address data to immigration officials.

That finding has widened concern beyond refunds alone. DHS/ICE data-sharing can affect trust in other immigration-related systems, including cases where families already fear that personal information given to one agency may surface in an enforcement file.

Immigrant communities have warned for months that tax data could be weaponized. The concern is practical, not abstract: workers who file with the IRS, including many who use individual taxpayer identification numbers, may decide not to file at all if they believe tax records can later be used to help locate them.

Unbanked households face a separate problem. About 4% of U.S. households do not have bank accounts, and the electronic payments mandate can leave them without a simple way to receive a refund. Older adults, people in unstable housing, and domestic violence survivors may also avoid sharing banking information for safety or access reasons.

Refund delays can quickly turn into housing and utility crises. For many low-income families, including those expecting the Earned Income Tax Credit, a tax refund is the largest single payment they receive all year. Lawmakers said delays of three to four months have been tied to missed rent, overdue power bills, and emergency borrowing.

Government records that frame the dispute include the IRS page [Understanding your CP53E notice](https://www.irs.gov/individuals/understanding-your-cp53e-notice), dated May 11, 2026; the House Ways and Means Committee hearing with Bessent on June 4, 2026; the Senate Finance Committee statement from Wyden on June 8, 2026; and the Federal Register publication of Executive Order 14247 on March 28, 2025.

Taxpayers who receive a CP53E notice may want to review the notice promptly and check their IRS Online Account for any requested banking update. House Democrats are pressing Treasury for fuller numbers on the backlog, while the legality of IRS disclosures to ICE remains under sharper scrutiny after the ruling by Judge Colleen Kollar-Kotelly and the June 8, 2026 TIGTA findings.

This article discusses government programs and regulatory actions that can affect tax refunds and immigrant communities. For personal tax questions, consult a qualified tax professional.

The piece cites government sources and watchdog reports; interpretations reflect the reported findings and statements by lawmakers.