Mistakes happen sometimes. It’s how a business or government entity behaves after the mistake that should really matter to consumers.
And in this case, to taxpayers.
We were alerted to a tax case by Jeffery Isaacs, a New Brunswick-based tax preparer, in which one wrong piece of information set forth a wild goose chase and a torrent of frustration.
Isaacs prepared a tax return for his client, Angely Corporan Brito of Somerset, in March.
Brito was due to receive federal and state tax refunds to her Wells Fargo checking account via direct deposit, but in mid-May, Brito called Isaacs to say she hadn’t received anything.
Isaacs said he checked the status of both refunds, and learned the IRS sent its refund on March 25 and New Jersey sent its refund on April 3.
Brito checked with Wells Fargo, which confirmed there were no deposits to her account.
That’s when they realized Brito had given wrong account information to Isaacs. He didn’t mistype the account number, but she gave the completely wrong number.
Her refunds were deposited into someone else’s account.
Isaacs got on the phone.
“Wells Fargo advised me that if the taxing authorities issued a ‘RO6 recall request,’ they can return the money to the respective taxing authorities so they can reissue a paper check to my client,” Isaacs said. “I called the IRS and this was initiated with no trouble. When I called Trenton they told me they are not responsible and can’t do anything.”
That didn’t sound right to Isaacs, so he checked the Division of Taxation’s web site.
It said: “The Division of Taxation is not responsible for a lost refund if you entered the wrong account information for a direct deposit. You must contact your financial institution for assistance in such cases.”
He called Wells Fargo again.
“I was told that without the request coming from the state’s bank, they could not do anything to help,” Isaacs said. “So the financial institution won’t send the money back to Trenton without Trenton asking for it, and Trenton says they won’t help this taxpayer. We were stuck in a loop.”
He said Brito’s $307 state refund was the result of the Earned Income Tax Credit, and she can’t afford to lose the money.
“People make mistakes. At no time did I ever feel or believe the state was responsible for the mistake … however, I feel they should help this taxpayer receive what is rightfully hers, regardless of their ‘no responsibility’ policy,” Isaacs said. “Given how easy and cooperative the IRS was when I contacted them, I was extremely surprised by New Jersey’s lack of empathy and compassion.”
The pair asked Bamboozled for help.
FOLLOW THE MONEY
We asked Wells Fargo to look at the case, and in the meantime we tried to determine exactly what the state’s rules are in cases like this.
Taxpayers filing online or through approved tax software can select an option for direct deposit, and are then required to provide the account information if they choose direct deposit, said Treasury spokesman Christopher Santarelli.
He said if a taxpayer accidently gives the wrong account information, the taxpayer should contact the Division of Taxation and their banking institution immediately. If the problem is discovered before the refund has actually happened, some employees in Taxation can correct the routing and account information, “or the direct deposit indicator can be inactivated so that a paper check is produced and mailed to the taxpayer.”
But in this case, we explained, the mistake was realized too late to stop the money from moving.
Santarelli said via email that he couldn’t discuss the particulars of this taxpayer for privacy reasons, but he did say if a taxpayer or preparer placed an incorrect account number on a return and that account number is valid within that bank, the funds would be deposited in the account.
That’s exactly what happened to Brito.
“If the direct deposit has already taken place, the banking institution can advise the taxpayer of what must be done to identify the funds and account and reverse the transaction,” Santarelli said. “Taxation does not have the authority to initiate transactions between accounts within a commercial bank.”
But hold on, we said. That’s not what accountant Isaacs said he was told by the banking institution — Wells Fargo, in this case. Wells Fargo said the state had to issue a R06 recall request.
We asked the state one more time for a clarification about R06 refund request.
“We have never heard of it,” said Joseph Perone, another Treasury spokesman.
Hmmm. He may not be wrong. More on that in a moment.
In the meantime, we learned that two days after we asked Wells Fargo to take a look, the money was where it belonged — in Brito’s account.
“I’m glad to finally have my money back,” she said.
So we went back to Wells Fargo to have a better understanding of the process.
After some back and forth, the bank determined the rep who first spoke to Isaacs was mistaken about the R06 refund request.
Turns out the R06 refund request has nothing to do with New Jersey, but refers to a federal procedure from Treasury’s Financial Management Service.
Furthering the confusion as to why it seemed the taxing authorities were supposed to help was that somehow, the IRS took steps to correct this wrong deposit — even though it’s supposed to be corrected by the bank.
“We generally instruct the taxpayer to contact the financial institution because the IRS technically followed the taxpayer’s instructions (for the direct deposit) and is now no longer part of the transaction,” an IRS spokesman said.
On the state side, it’s also the taxpayer’s responsibility to contact the bank to explain what happened, at which time the bank would refund the money to the state, the Wells Fargo spokesman said. At that time, the taxpayer would have to file a new claim with the state to send the refund to the correct account or to issue a check.
Wells Fargo said in this case, it worked with the customer’s information and was able to expedite the refund.
SOME MORE ADVICE
This may seem like an unusual case, but according to the federal Treasury Department, some 140,000 tax refund recipients file claims with the IRS each year saying they didn’t get their direct deposit.
So, this could happen to you.
If it does, and if your financial institution tries to send you back to the taxing authority, remember this story.
Also, Taxation and the IRS want you to know you a few things.
First, be proactive and carefully check any forms you submit, making sure your account numbers are correct. Then check them again.
Also, you can get information on your income tax refunds either online or by telephone. For New Jersey, you can call (800) 323-4400, which is toll-free within New Jersey, New York, Pennsylvania, Delaware and Maryland, or call (609) 826-4400. For the IRS, start with the “Where’s My Refund” tool.
There’s another note Treasury wanted to share with you, dear readers.
“It’s important to note that Treasury is responsible for safeguarding taxpayers’ money from fraudulent claims,” Santarelli said. “The Division of Taxation has prevented $7.4 million of fraudulent refunds from being paid this year, including some based on returns filed on behalf of deceased taxpayers, as part of an ongoing program to fight identity theft. In April alone, Taxation halted payment of $4.6 million based on 1,800 fraudulent returns.”
Bravo to that.