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can refund go to 2 accounts - someone other than TP


schirallicpa

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For payroll purposes, to compare, an employer would be NUTS to deposit pay into an account not controlled by the employee.  Employee will win a claim the funds were not given to "them", should a different account holder (possible exception for spouse or legal partner) "take" the funds.  Some will not direct deposit unless the account is only controlled by the employee.

Quick online search implies the IRS will flag the return in some manner, if the account does not belong to the TP.

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I think it's a bank decision to accept or to not accept a direct deposit without a name match. The someone else would need to work with his bank to know if they will accept. I've seen it work for a kid's refund to go into his parents' account, when kid has no bank account.

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There's nothing to stop you from trying this, but there are no "safety nets" that will prevent the financial institution from rejecting that part of the refund into an account that doesn't have the taxpayer's name on it. 

cbslee is right that the worst is that a paper check may be issued for that part, but do you want the hassle?  We all know that even if you explain that risk to the client, that all the client will hear is "we can do it."  Then, if that part of the refund bounces back to IRS, the client will call you to help find out what happened. 

I agree with Jack and Randall, and I'd try to discourage the client from trying this.  Why can't he receive the full amount and then give the funds to the other person by other means?  There are plenty of other very easy ways to transfer funds these days.

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The IRS does NOT check who the bank account owner is; if it's a valid account, in it goes.  And there is no recourse if it goes to the wrong place.  DON'T do it; if the other person gives a wrong digit, the money could well be lost forever.  Write 'em a check, send a wire transfer, send 'em Western Union, buy 'em a gift card.  Just don't do this.  Really.

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1 hour ago, Catherine said:

The IRS does NOT check who the bank account owner is; if it's a valid account, in it goes.  And there is no recourse if it goes to the wrong place.  DON'T do it; if the other person gives a wrong digit, the money could well be lost forever.  Write 'em a check, send a wire transfer, send 'em Western Union, buy 'em a gift card.  Just don't do this.  Really.

I do not like to have refunds direct deposited and try to discourage it.  In the rare cases where I have done it, I first get a copy of a Voided check for the target account; then print out the worksheeet and send it to the client, have the client review it and Sign off on it as having the Rtg # and acct # correct.

That way if anything goes wrong, it is on the client.

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9 minutes ago, Max W said:

I do not like to have refunds direct deposited and try to discourage it.  In the rare cases where I have done it, I first get a copy of a Voided check for the target account; then print out the worksheeet and send it to the client, have the client review it and Sign off on it as having the Rtg # and acct # correct.

That way if anything goes wrong, it is on the client.

I would say that 90 % of my client refunds are direct deposited. I always insist on having a copy of a voided check.

The only time that I have had problems was in the past  when some banks used to use a different routing number for deposits than for checks.

Also I won't do direct deposits to savings accounts unless the client provides me a copy of a deposit slip.

Over the years. my clients have only had 3 or 4 direct deposits bounce back to the IRS and none of them were upset.

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Most of my clients want direct deposit. I get a check, even if it's the check paying my fee. And, I have them look at and sign the Direct Deposit/Debit Report to CMA. If I'm uploading signature pages to them, that report is included with all the signature pages.

More and more are choosing direct debit, also. Small amounts, younger clients, convenience, used tpo paying for things online, different reasons, but debits are appealing to more of my clients.

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2 hours ago, Max W said:

I do not like to have refunds direct deposited and try to discourage it.  In the rare cases where I have done it, I first get a copy of a Voided check for the target account; then print out the worksheeet and send it to the client, have the client review it and Sign off on it as having the Rtg # and acct # correct.

That way if anything goes wrong, it is on the client.

I've been using the direct deposit method for many years with no issue (this year I will probably have a ton, now).  I do like Max's idea idea of printing out the worksheet and having the client confirm it.  

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