Direct Deposit Question

[JCH]

My software, Drake, prints out the routing and account number on the 8879. If there's a direct debit, it prints out an ACH form for the client to sign for federal and state.

[WhiteOleander]

In our office, we refuse to do a DD if they cannot give us a copy of the check with the numbers on it. We attach a copy of that check to our office copy. Also, before we transmit, at least on other preparer in the office checks the number on the bottom of the 1040 page two against the check.

If the client can't or won't give us a copy, we refuse to do the DD. We are very hard-nosed about this because we don't want to somehow be held responsible for the screw-up.

[S T]

Learned the hard way

I always ask the taxpayer for a "voided"check to make sure I have the right routing and account numbers.

This year, my software also prints out a Bank Verification Sheet, and I have been having the client also review this form and sign off, before transmitting for direct deposit. One would think that this would be incorporated on the 8879 forms. A few states have on their forms.

I had a couple filing in 2008 for the 2007 tax returns, that were in the midst of a divorce, and the husband wanted the refund to go to his business account. I simply said it could not be done, either a joint account that is still open or a paper check made payable to both of you. I am not getting myself involved in an issue on where the refund check shoulda, coulda, woulda be deposited.

There are also a few sites or the actual "Bank" site that will provide the correct routing number, and I have had to check that a few times when the client wants to read me the numbers on the phone.

Sandy

[oceanlovin'ea]

Agree

I just thought of something that happened. When a direct deposit goes to a bank and there is something that isn't just right ( bank account number could be off or some silly reason), it doesn't post immediately to the account. There is a report that prints out and a real person looks at the report. They can look it up or check to see why it didn't post like it should have. Then they can either send it back or allow it to post. Maybe that person sent it back from the bank.

I know this happens because a couple of years ago when I started to pay bills online, I was making a credit card payment from my checking account. It posted every month for several months. Then one month I got a notice saying my payment was returned. I called the credit card company and they told me to call the bank. When I did, I was told that the account number was incorrect with the credit card company. I had left the 10000 off before the numbers on the credit card website. I told them it had been posted ever since I set it up. "Why didn't you let me know I had something wrong" I asked. She told me that apparently when it came through whoever was checking the report could see what I had done and went ahead and let it post. This particular month whoever did the report didn't see that and sent it back. The credit card company made me get a letter from the bank stating what had happened before they would take off the late fee and reinstate my low interest rate.

So your daugher-in-law could have thought she gave you the 'whole' bank account number and really didn't. So it got returned.

Just a possibility.......don't know how you would find out now though.

Linda

[thomtax]

Are you sure the bank rejected it because of that reason? I occasionally hear that EFT's are rejected and a subsequent check is issued, and no apparent reason can be ascertained. I heard that if the electronic system happens to be down when it attempts to process, that it automatically goes to check issue, since they don't have the time to keep trying to get it to process.

No, I'm never sure of anything with the IRS.

The website said that it was direct deposited. When I talked with the IRS, after about 40 minutes, that is what they told me.

LT

[Jesse]

I am not 100% on this, but last year a bank employee told me that if the account has all the numbers correct it will go into an account without being questioned. If there is a slight error it will "non-post" and need to be manually put into the account.

For example if beginning or ending zeros are not entered, like if the account number is 01000321123 and the beginning zero is omitted and entered as 1000321123 it will "nonpost" and the name(s) and account number are verified and manually deposited. Or if you mark Checking and it is a Savings account it again "nonposts" and name and account number is verified.

[fliszt]

A few yrs

ago, I quired the IRS Efile people about MFJ refund being deposited into a bank account in the name of "Mr." only. I was told it would be returned by the bank and the IRS would then send a paper refund to the MFJ persons.

[Burke]

Are you sure the bank rejected it because of that reason? I occasionally hear that EFT's are rejected and a subsequent check is issued, and no apparent reason can be ascertained. I heard that if the electronic system happens to be down when it attempts to process, that it automatically goes to check issue, since they don't have the time to keep trying to get it to process.

[thomtax]

You can designate a refund to go into any account you want to. This is done by computer and no one checks to see if it is in the right account.

My daughter who has a different last name than mine has had her refund deposited into my bank account when she had a refund or had to file for years. Her stimulus payment went into my bank account too.

Several years ago the bank account had to be in the name of the person getting the refund but IRS changed that probably 2 or 3 years ago. I remember learning that at the IRS forum one year.

Linda

I would respectfully disagree. This past year my son got divorced. The agreement stated that she would get the refund. He had it set up to have the refund mailed, so he could sign and have a record that she received it. She pitched a fit, and had it to be direct deposited to her account. The deposit was rejected because it was not a joint account. With all the delay, it caused the stimulus not to be paid in 2008. Now, since he will be filing as HOH, he will lose several hundred dollars by filing for it this year.

LT

[Burke]

Burke...if you split the deposit of a married couple into each respective personal account do you allocate the refund amounts based on taxes paid by each?

That is a very good question, and since I have not done one yet, I cannot answer, but it might be a very good idea especially for a divorcing couple. I suppose that would have to be agreed upon by the two parties up front, and I would probably require both of them to sign some statement to that effect. I HAVE had to calculate MFS for certain taxpayers to determine what each person's portion would be, just so they could allocate it when it came in to the joint account.

[oceanlovin'ea]

refund in any account

You can designate a refund to go into any account you want to. This is done by computer and no one checks to see if it is in the right account.

My daughter who has a different last name than mine has had her refund deposited into my bank account when she had a refund or had to file for years. Her stimulus payment went into my bank account too.

Several years ago the bank account had to be in the name of the person getting the refund but IRS changed that probably 2 or 3 years ago. I remember learning that at the IRS forum one year.

Linda

[kaimana]

Burke...if you split the deposit of a married couple into each respective personal account do you allocate the refund amounts based on taxes paid by each?

[Burke]

I had one once, where the wife said they did not get the refund the previous year, and we researched it with the IRS. It went into the husband's individual bank account. Good thing it was not a problem with them. Ever since, I don't do it.

[JAinNC]

IRS has no problem with

the direct deposit going into either one of the TP's account on a joint return. But ..... I just make sure the husband and wife actually sign the 8879 in the office (as opposed to one spouse taking it home to the other spouse in these cases) and it is disclosed and checked off by the TP withourt the bank account.

[Burke]

because deposits often go into the totally wrong accounts because of mis keyed routing and account numbers.

You are correct. There is a common belief that these things receive a lot of scrutiny by banks, but my experience is that they do not. The direct deposit will go into any account designated on the return whether it belongs to the taxpayer or not. However, I no longer will show an individual account on a MFJ return or one which belongs to a relative, etc, etc. for my own protection, whether the IRS will do it or not.
Now that they will do multiple accounts, I would consider 1/2 in each acct for a MFJ return which might be advantageous to a couple who is splitting up, or just keeps all finances separately.