It is no secret (we hope) that there have been so many victims of fraud the past year that something needs to be done. The IRS has come up with a way to help fight back against these scammers. Effective January 2015, there will be a limit of three refunds that can be electronically deposited into one financial account or pre-paid debit card. If four or more refunds are requested, they will automatically be sent via a paper check and mailed. (So will they match this up to the number of refunds and investigate? Who knows?)
Taxpayers can always login and track their refunds at Where’s My Refund. The IRS would like taxpayers to know that direct deposit is still the most efficient way to go about receiving their refunds.
This limit on direct deposits will detour criminals who will not be able to steal the identities of innocent tax payers to have their tax returns deposited into a bank, checking account or loadable debit card. This will also help protect taxpayers from dishonest tax preparers who intentionally have their clients refunds deposited into their own bank account.
Did you know that having your clients refunds deposited to your office account is illegal?
This should not affect too many taxpayers in a negative way. A family in which the parents and children’s refunds are all deposited into a bank account which is held by the family could be affected. If your clients preferred this method in the past it would be a nice idea to give them a heads up to either make other arrangements for direct deposit or to receive paper checks which typically take about four weeks to receive.
All direct deposits to accounts must match the taxpayer’s name. Preparers will not have the ability to recoup their fees by using the Form 8888 to split the refund or by opening a joint bank account with the taxpayer. If a preparer performs any of those actions they will be subject to penalty under the Internal Revenue Code and to discipline under Treasury Circular 230.
If you need to get your preparer fees UltimateTax Service offers bank products and fee collect products to help get you paid. After all preparers don’t do all this for free!