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April 4, 2003
Be careful
what you wish for.
Not that long ago, Michigan was running ads
encouraging people to file their taxes early because the state was getting
buried alive in returns at tax time. The Feds weren’t far behind – as a matter
of fact, even with more tax returns to examine, they were ahead of the states in
processing returns.
Television campaigns cranked up and encouraged
people to “E File,” that is, let their tax preparer send their return in
electronically. There wasn’t much incentive to do this until people found out
that if you filed electronically, and had a refund coming back to you, it
reduced the waiting time. Additionally, if the check was direct deposited, the
time was cut even more.
“In February, the IRS sent out a notice saying
they were getting so many filings in early and electronically that it would be
wise to advise people their check, if they were due an amount, wouldn’t be
coming along that quickly,” said Millian Toms, our CPA.
“They didn’t expect so many to file early. They
(the feds and the state) have been pitching it and pitching it, and when they
did, they couldn’t keep up with the volume.”
Millian is certified to E-file your completed
tax return. You sign off on the hard copy, which Millian keeps for up to 6
years, and then types it onto a special template. A secure connection is then
made and your tax information is on its way to the state and federal fact
checkers. The electronic file carries the same weight as the original you signed
in Millian’s office.
“In a way, this system works much better. For
instance, it has to let you know within 24 hours if there’s an error,” Millian
said. “Without E-filing, that can take up to weeks, depending on how overworked
the system is and when someone can get around to checking your file.”
The law, according to Millian, breaks down into
5 reasons to e-file, and one gigantic reason not to use the direct deposit
option:
- The return must be complete. It can
take Millian up to 5 hours to enter all the information for some returns into
the system. Remember though, she’s using a professional system not available
to the public and even if it were, most of us probably wouldn’t use it
correctly. It’s not an off-the-shelf piece of software.
- You sign a form authorizing Millian to E-file and she hold
that form on behalf of the IRS.
- While it’s faster, the rules don’t change. If a SWAT team
kicks in Millian’s door, metaphorically speaking, and wants the original
paperwork, the fact that you E-filed protects you not. Millian would be
obliged to hand over the original paperwork bearing your signature.
- “There are less chances of mistakes. It keeps paperwork
from following a regular paper trail, where mistakes can be introduced.”
- If you have money coming back, then the file, once cleared,
deposits the money directly into your checking or savings account, if you so
choose. That’s the key.
Now. The one huge reason Millian has a problem
with this system is due to a small article she has taped to one of her book
cases, so she can see it every day. The headline tells the whole story – there’s
no need to go further. The headline says: “IRS Does Not Have to Replace
Incorrectly Deposited Refund Check.”
It means just what it says. The IRS mistakenly
deposited money in the wrong account, and the courts upheld the ruling that it
did not have to take the money out and put it in the correct account. The only
recourse the account holder had was to sue the party that mistakenly got his
money.
So if you think you’re in a hurry for your
refund, Millian recommends taking a second and thinking about just how much of a
hurry you’re in. “You’ll receive your check about 7 days later than you would if
it were electronically deposited. Personally, I advise my clients to wait, and
most of them do. You can e-file and elect to have the IRS send you a check – you
do not have to have your check direct deposited. It’s very important to remember
that.”
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