Picture this…It is tax season once again. Whether you extended your return and paid an estimate, or pay estimates throughout the year, you receive a notice that you have a balance due after filing. The IRS indicates they have not received an estimated tax payment, but you know you sent it via check. You have the proof right in front of you! However, what you didn’t notice was that someone else had intercepted that check and endorsed it themselves. You receive another notice, this time from the state, and realize the same thing happened with that estimated tax payment as well!
You reach out to the government and the bank. The bank tells you they will refund the money back if they can recover the funds from the individual who stole the money, which is likely a long shot! They also tell you that you took too long to notify them, so they are not obligated to cover the stolen funds. Now you reach out to your homeowner’s insurance, which may only cover a portion of the money stolen from you. You still owe the government the tax payments they never received and must fill out additional forms to alleviate penalties and interest.
Unfortunately, this was the exact scenario a taxpayer recently encountered. In disbelief, I sent an internal email to my tax preparation colleagues to warn them about this potential issue for our clients, and one exact response was, “Very timely, as this just happened to another one of our clients for $220,000!”
Estimated tax payments need to be made throughout the year for many individuals. However, if the government never received the payment, you won’t be notified until after your return had been filed. In some cases, this could be well after the period allowed to notify the bank of fraud.
Individuals and businesses are more at risk than ever for credit card fraud, identity theft, accounts being hacked, scams, and so much more. Every time we turn around, there always seems to be something else you must be aware of and protect yourself from, especially when making payments. Mailing a check sometimes feels like the safest thing you could do these days. But as you can see from the scenarios above, even writing checks requires some extra steps of review to ensure that the payment makes it to the intended destination.
So, what can you do differently when making payments to the IRS?
- If you are paying anything by check, make sure to review the endorsements on your next bank statement by examining the back image of the cancelled check.
- Create an online account with the IRS or state government agency you are paying the estimate to and confirm they received and properly applied the payment to your account.
- Consider paying your estimates online directly to the government agency through your online account.
- Whenever you receive a notice, always make sure to forward it to your tax professional to ensure that it is legitimate and accurate!
Yes, it seems as if nothing is safe anymore. But taxpayers can protect themselves by following the simple steps above to ensure they aren’t a fraudsters next victim.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
