Tax News: IRS To Limit Number of Direct Deposit Refunds Into a Single Account

 In Tax News

The IRS has announced that beginning in January 2015, only 3 direct deposit refunds will be able to go into any single financial account.  The fourth and following refunds will automatically convert to a paper check that is mailed to the taxpayer.  This change is an attempt to prevent fraud and identity theft issues.  Frequently, this type of fraud comes from tax preparers taking advantage of their clients.  The tax preparer can either file faulty returns for the client in order to share the benefit, or a scarier situation is where a return is filed without the taxpayer’s knowledge.  In some cases, the tax preparer shows the taxpayer a tax return for signature that includes a refund.  The tax preparer may then offer to pay the refund to the taxpayer immediately, in return for the taxpayer having the refund deposited in the tax preparer’s account.  Then, the tax preparer fraudulently changes the tax return and files a return showing a larger refund, and pockets the difference.  Unfortunately, this is a common case.  When there is tax preparer misconduct, one of the first steps for a taxpayer should be to review IRS records to make sure the returns they have signed are actually what was filed under their social security number.   In fact, the situation is so common the IRS even has a reporting procedure in place using Forms 14157 and 14157_A to report these incidents.

Despite these changes, the IRS encourages taxpayers to continue to use the direct deposit method for refunds.  Most taxpayers will not be affected by the changes.  Hopefully, these changes will help limit the possibility that the taxpayer is ever affected by the fraud and misconduct they are designed to prevent.  If you have received IRS notices that don’t match what you believe should be on file for your account, or other questions regarding your tax return, contact us at Hone Maxwell LLP today for a complete analysis of your tax situation.  As always,  you can follow us on twitter @HMLLPTax or facebook at www.facebook.com/HoneMaxwellLLP for more tax tips and the latest updates on tax news.

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