Coronavirus stimulus checks: Where is the missing money going?

Coronavirus stimulus checks: Where is the missing money going?

Americans are reaching out to tax preparers and lining up at their offices around the country to find out what happened to their stimulus checks.

One answer: The IRS sent those missing payouts to an intermediary bank account if a client got an advance on their tax return, tax professionals say.

Clients tipped tax preparers off to the problem when they used Get My Payment, the government’s new stimulus deposit tracking portal, and uncovered that the payments of up to $1,200 for individuals were sent to an account number they didn't recognize.

Agencies that help people file for government-issued refunds are receiving an influx of calls regarding the one-time payout meant to be disbursed to 80 million Americans this week. While many people received the deposit, other payments may have gotten inadvertently sent to temporary accounts created during the tax filing process.

The IRS said it is moving to provide additional information and resolve any issues as soon as possible.

An image of the Capitol building in Washington, D.C., next to a messy pile of one hundred dollar bills and economic stimulus checks from the Treasury Department.

Where are stimulus checks going?

Natalie Parchment, a tax preparation consultant in the Washington D.C. area, has been inundated with calls and emails from clients wondering what happened to their payout.

“I had to investigate,” Parchment said.

She discovered that the unrecognized digits that people found listed on the portal were linked to refund transfers accounts, often created on behalf of taxpayers who want preparation fees taken out of refunds so they don’t have to pay preparers upfront.

“Those last four digits on the Get My Payment portal match the transfer provider's information that has been submitted to the IRS,” Parchment said.

After you file your taxes with a tax professional, transfer banks such as MetaBank, Republic Bank and Santa Barbara Tax Product Group set up temporary accounts for taxpayers who want a refund advance or to deduct tax preparation fees from a refund.

That account number and the bank's routing number are sent off with the tax return to the IRS.

The IRS deposited some stimulus checks into these temporary accounts, according to MetaBank. "The IRS has not explained to us why this error occurred," MetaBanks said in a statement.

Why are checks deposited in wrong accounts?

The issue has popped up among filers who have set up a tax advance in previous years when filing tax returns, according to Toby Mathis, a partner and attorney at Anderson Law Group in Las Vegas, Nevada. The IRS is basing stimulus checks off tax returns from 2018 or 2019, whichever is more recent.

A tax advance typically works like this: When a tax preparer does a filer’s return, they can loan them a portion of their refund in advance. The IRS will then send the actual refund to the preparer via a bank account set up in the filer’s name. The loan is repaid from the refund and the remaining portion of the refund is returned to the filer.

Everyone from mom-and-pop tax preparers to big chains like TurboTax, H&R Block and Jackson Hewitt have this option, Mathis said.

The issue is that the account where the stimulus payment was deposited didn't belong to the taxpayer. It belonged to the service provider.

"The provider’s bank is supposed to refund the $1,200 payment back to IRS in these cases," says Evan Morgan, tax director at Kaufman Rossin.

Those intermediary accounts tend to only be used for a filer’s refund in previous years, so those accounts likely no longer exist. The IRS hasn’t given out specific guidance yet on how they will reissue stimulus checks if they are deposited in the wrong accounts. But normally if a bank account is closed, a tax refund is rejected and the IRS sends out a paper check to the address that was on the return.

What happens next?

Another possibility is a bank will return those funds if the money lands in the wrong account since the name on the deposit didn't match the name on the person’s bank account, Mathis explained. If the funds are rejected, the IRS would likely issue a paper check to the last address on file, he said.

“For people who have moved, that could be a big problem,” Mathis says. “People are already having a heck of a time trying to update their information on the IRS website.”

The IRS is expected to start sending paper checks on April 24.

"If a payment is returned to the IRS, the agency will mail a check to the taxpayer," according to the Santa Barbara Tax Products Group which takes tax preparation fees out of refunds.

Who has been affected?

After people in San Antonio, Texas, complained about the missing checks to Snapback Tax Services, the local agency blamed the IRS for the error.

"The information that many of you are seeing on the IRS website is your account information to MetaBank. They are the bank that processes your tax refunds," Snapback Tax Services said on Facebook.

In Augusta, Georgia, dozens of people crowded Citi Tax Financial, thinking the tax preparer was responsible for lost checks, according to local media.

A similar event unfolded in Tallahassee, Florida, this week after confused residents stood outside of Galaxy Tax Services with tax papers in hand.

H&R Block, the tax preparation company, said its clients were impacted by the confusion the IRS created.

"We share our clients’ frustration that many of them have not yet received these much-needed payments due to IRS decisions,'' the company said in a statement provided to USA TODAY, "We are actively working with the IRS to get stimulus payments sent directly to client accounts.''

Source: https://www.usatoday.com/story/money/2020/04/17/coronavirus-stimulus-checks-where-missing-money-going/5144515002/

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