D.C. income tax refund checks were not being honored yesterday by the bank against which they are drawn, although officials of both the city and the bank said there was money in the account to cover the checks.

Ivanhoe Donaldson, general assistant to Mayor Marion Barry, said officials of the United National Bank had "panicked" after being notified Wednesday of a single instance of possible check forgery, and reading press reports about a city employe being arrested for passing forged income tax checks.

Bank officials acknowledged that they were refusing to honor the checks yesterday, but said that the problem had been resolved and that the checks would be cashed beginning today.

"United National did what it did to protect everybody involved," bank president Samuel Fogey said. "We did what was only reasonable. I have a bank to protect."

Carolyn L. Smith, director of the D.C. Department of Finance and Revenue, said a member of her staff called the bank Wednesday to report an incident of apparent check forgery.

The Washington Post reported yesterday that an employe of the city's finance department had been arrested March 3 and charged with allegedly passing forged income tax refund checks.