Here’s what happened and how you can prevent it in the future.
“I filed my taxes last year with TurboTax, but haven’t received my second stimulus check.” This is a story many tax preparers are hearing over and over again during this season.
Here is the long and the short about exactly what is going on. Please note that this situation only affects people who chose to have their tax prep fees withdrawn from their 2019 tax return and used TurboTax.
When you file your taxes using TurboTax and chose to have your fees withdrawn from your refund, someone still has to pay the IRS up front for those filing fees. TurboTax used a bank to front those fees. The government doesn’t work for free. That bank’s information was then listed on your tax return under the bank account information. This was done so that they received your refund, withdrew the fees, and then paid the rest back to you as your refund. This is all pretty standard stuff up until this point.
Fast forward to the first stimulus bill. The bank received the money for your stimulus and then ran the process to send your stimulus payment to you. Here’s where the problems start. Between the first and second stimulus bill, said bank went out of business. Remember that the IRS does not have your direct bank account information because of the situation. The IRS could not send your payment to a routing number that is no longer valid so they are currently sitting on that money.
What’s next? The IRS should attempt to mail you a paper check at your address on file. If by the time you file your 2020 taxes, you still have not received a paper check your tax software or tax preparer should ask you questions concerning the 2 stimulus checks. If you have not received your payments, that amount will be added to your refund. While I have not heard a definite answer on what will happen if you owe, I assume that your outstanding stimulus amount will be deducted from your tax liability first.
While in this situation, TurboTax was affected. But this could have easily have happened to any service of the same type. Let this be a lesson to all to pay for your fees upfront.
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