Single Bank Acct - Joint Refund

[Snaggletooth]

Typical Tennessee youngsters, BillyBob and SweetSue have been married a few years, but have always filed MFSeparate returns.

This year they came to me and I was successful in explaining some $2000 difference by virtue of MFJ.

So they are MFJ this year and have a $4800 refund. Sue has a bank account in her own name with no other name on the account. BillyBob has no bank account period.

How will this e-file direct deposit play out? Haven't had this situation in a few years, but it has caused problems 4-5 years ago. Is the situation different now??

[taxea]

IRS requires TP name on account for refund...banks will not deposit a MJF refund into a single TP account. I would suggest that they open a joint acct with the minimum amount necessary and then the refund can go into this acct.

[Koss]

Official Answer

Snaggletooth wrote:

Haven't had this situation in a few years, but it has caused problems 4-5 years ago. Is the situation different now??

The official answer from the IRS is:

It may work, and it may not. You can try it and see.



Really. I'm not kidding.

From page 20 of Publication 1345:

Providers should caution taxpayers that some financial institutions do not permit the deposit of joint individual income tax refunds into individual accounts. The IRS is not responsible if the financial institution refuses Direct Deposit for this reason.

If the bank refuses the direct deposit, then the taxpayer will get a paper check. But it will almost certainly take longer than if they had chosen a paper check to begin with.

Of course, your client could ask the bank if they accept a joint tax refund into an individual account... I think there's probably a 75% chance that they'll get the correct answer--if they ask a banker who sits behind a desk, at a real bank.

The probability that they will get the correct answer from the bank drops to about 50% if they ask a teller. If they ask the question at a bank branch that is located in a grocery store or a Wal-Mart, the probability of getting the correct answer drops to around 20%.

Call me cynical, but there's an awful lot of people working at banks that have no idea what they're talking about when it comes to anything other than making a deposit or cashing a check. One banker working at one of those grocery store branches once tried to tell me that they could not open an IRA account as a simple savings account. She said she could do it as a certificate of deposit, but for anything else I had to talk to a financial advisor at a different branch. When I escalated the matter to her manager, I was told that an IRA could not be opened for a person under the age of 18.

To return to the original topic...

Why don't they just add his name to the account?

That would be too easy. Do they realize that they don't have to order new checks, that the account number would not change, and that they could continue using the supply of checks they have? He could even sign those checks if they add his name to the account. That's exactly the sort of thing that would confuse the h**l out of a poorly trained or inexperienced banker.

I'll concede that if he tried to write and sign a check that only had her name imprinted, and use it to make a purchase at Wal-Mart, they probably wouldn't accept it. But if he's paying the electric bill by mail, once his name is on the account, he can sign those checks...

BMK

[AJsTax]

Wrong information!

IRS requires TP name on account for refund...banks will not deposit a MJF refund into a single TP account. I would suggest that they open a joint acct with the minimum amount necessary and then the refund can go into this acct.

Apparently as long as one of the names is on the bank account IRS will deposit it. Beyond that it is up to the bank rules. I have deposited my joint return into an account with only my name on it for years. Just received the one for this year yesterday. The years we file MFS we put it into our own accounts. The years we file MFJ we put it into my account with only my name on it and no other signature authority.
I have never had a problem with direct deposit of multliple deposits into one account or into an account with only one name. That is not to say we won't. And I am talking over a thousand returns a year, not 20 or 30. Of course not all of those are direct deposit.!!!!

Edit:
What Koss has posted is the official written explanation that is available in the E-File manual. Mine is from personal experience. So between the two........

[thomtax]

It strictly depends on the bank. It doesn't seem that IRS cares either way. I have the following 3 scenarios:

1. Client does not have bank account. Each year, for several years, has the refund successfully deposited into parents account that she is not on.
2. A client who is not on spouses account, successfully has refund deposited into this account for MFJ return.
3. Another client, using another bank, trying to do the same thing as in #2 and the bank rejected it. They received a check about 8 weeks later.

So, as I said, it seems to be strictly up to the bank. As long as you supply IRS with numbers, it seems that they will send it.

LT

[oceanlovin'ea]

agree

I would agree that it depends on the bank. I had my daughter's refund deposited in my account because she didn't have an account and had no problems.

I have had client's do the same with no problem.

It is done by transfer electronically. No person sees whose name is on the account. It just goes where the IRS says it should go.

But it does seem that a long time ago, we were told you couldn't do it. Snag, I do remember that. But it seems to work most of the time now.

Linda