What happens when you get a tax refund direct deposited in your bank account? Well, you spend the money (or invest it, etc.). But what if that isn’t your refund? Well, that’s a problem.
Earlier this year I reported on individuals in Ohio who were notified that they would receive $200,000,000 refunds. The letters were in error, of course, and no refunds were issued. Had they been issued refunds they would need to return the checks. If the funds had been direct deposited, the individuals would be liable for interest on the money, too.
One “lucky” resident of nearby Laguna Beach received an unexpected $110,000 in his bank account. Reginald McDow is accused of having the $110,000 related to another individual’s tax refund deposited into his bank account and then not returning the money. The other individual put the wrong bank account number on her return (she had closed the account years ago, and Citibank allegedly reassigned the account to Mr. McDow), and Mr. McDow got his free money! According to the Orange County Register, Mr. McDow allegedly used the money to pay down his own debts.
The Orange County District Attorney is accusing Mr. McDow of theft. (Note that the alleged crime is a state charge, not a federal charge. Mr. McDow would be prosecuted in Orange County Superior Court.)
There are two morals to this story. First, if you receive a tax refund you are not expecting, you should check with the tax agency. I had a client recently receive a $1,500 refund. It turns out it was sent in error. My client had not cashed the check, and she is returning it to the IRS. If you receive a refund that’s not yours, you will need to return it to the tax agency. No, it’s not finders keepers.
Second, if you use direct deposit or electronic funds debit, make sure you check the banking information every year! If you make a mistake, your refund might not bounce and it could end up in an unscrupulous individual’s account. I’m unsure if the person who should have received the refund in this case is being made whole by the IRS or if she must pursue the alleged recipient of her funds. What I do know is that if she had verified and corrected her information before hitting “send” on her tax return, she would have the $110,000 and this would never have happened.
Hat Tip: Peter Pappas’ Tax Lawyer’s Blog
Tags: Refunds
[…] Last year I reported on the case of the misplaced tax refund. An Orange County, California women put in the wrong account number on her tax return. She used an account that she had closed years ago. However, Citibank reissued the account to one Stephen Reginald McDow. The woman wasn’t expecting a refund of $110. Rather, she was expecting $110,000. When the refund didn’t show up, she started investigating. […]