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Monday, June 2, 2008

A true inconvenience

There's something about TurboTax that doesn't like "kicker" checks. We've blogged here previously about problems that Oregon TurboTax users have had getting that tax preparation software to deal with last year's large Oregon "kicker" refund checks. First, users were complaining that the program had inadvertently (or perhaps even erroneously) donated their Oregon "kickers" to the state school fund. Then we ourselves complained about how hard it was to get this year's TurboTax to report correctly the "kicker" we received last December.

Now the federal "stimulus" payments are making for some mildly unhappy TurboTax customers, and not just in Oregon. Although the IRS has almost finished wiring the stimulus money to taxpayers who got their regular tax refunds electronically, many TurboTax users who e-filed will have to wait for a paper check, which may not arrive for several more weeks. The reason? They availed themselves of too many TurboTax conveniences.

A reader who has found himself in this boat e-mailed us over the weekend to point out his problem. "It took me some digging to find this," he writes, but the situation is described here. According to the official TurboTax site --

Even if you have received or will receive your tax refund by direct deposit to your bank account using Santa Barbara Bank & Trust, the IRS will not do the same for your tax rebate. It will mail your rebate instead.

This situation applies only if you chose, at the time you filed your tax return, to pay your tax preparation or filing fees by having them deducted from your expected refund. The payment arrangement with the bank, which carries an additional fee, offers an alternative to paying with a credit card.

Why can't I have my rebate direct deposited just like my tax refund?

When TurboTax customers decided to pay their tax preparation or filing fees with their refunds, they authorized a bank to set up temporary accounts to be used only to receive their 2007 income tax refunds from the IRS. The temporary bank-account information was transmitted to the IRS along with each tax return.

The IRS sent the refund to the temporary account and the bank then transmitted the tax refund (minus the tax preparation fees) directly to the customer's actual bank account.

Because the IRS does not receive a taxpayer's bank-account number, under this payment method, it cannot match a taxpayer with that taxpayer's regular bank account.

That's why the IRS decided that taxpayers who entered into financial transactions with third parties, such as SBB&T, would get rebates by mail.

And so if one took the path of greatest convenience -- getting one's refund electronically, and having tax prep or filing fees taken out of the refund -- one gets the most inconvenient version of the stimulus money: a paper check, and a delay of a month or more.

Isn't that special?

Even crazier than this turn of events, however, is the fact that people would pay these fees in the first place. We asked the reader how much they were, and he reported:

$29.95 "SBBT Refund Processing Fee"

$35.90 "Electronic Filing Transmission Fee and/or service fee for web users"

And that's on top of paying for the TurboTax program, I believe.

People, that's just nuts. Do as we do: Buy TurboTax with a coupon at Costco -- this year, it cost $21.99. File a paper return -- cost of postage, a couple of bucks at most. Get a paper refund check. Walk or bicycle it down to the bank and deposit it -- cost of processing, zero.

To me the larger tragedy here is not the delay in receiving the stimulus payment, which is bad enough. Rather, it's somebody paying TurboTax and its cronies $66 for something that should cost about $1. If you've got a computer, put it to work for you, not against you.

Comments (4)

Okay, I didn't use TurboTax, but TaxCut from H&R Block. I don't know what the rep is for this program, but it seems to have been okay for the two years I have used it after telling my accountant to get lost because of his poor service.

With TaxCut, I was able to file electronically for free and got my tax refund within a couple of weeks, direct deposited in my bank account. But I have yet to receive the stimulus check. I wonder if there is some glitch with the program about this.

Speaking of the kicker problem, the Department of Revenue is still trying to figure out what the heck happened. At the Tax Practitioner's meeting last week, DOR meantioned that it was still under investigation on their end, but that they believed that they'd dealt with everyone's complaints.

It's not like it's taking so long to get checks in the mail. I got mine already.

I've been a TurboTax user since their beginning so long ago.

I've used their electronic filing from the first time it was offered. Sure, it cost an additional few dollars or so for the filing fee - had to pay $15 each to Fed and State.

The benefit?
- refund less in 10 working days or less (Fed in 10 days; State in 3)
- no paperwork! judge burned a CD with the records and the PDF, plus a printed copy for good measure
- no treking to the post office and waiting, and paying for the certified mail, extra postage, delivery receipt, and proof of mailing

My only gripe is that our IRS, Federal, and state government should be paying for these filing fees. After all, that is their cost of doing business with the citizenry. It does cost them considerably more to process paper returns!

Also, I got the Fed stimulousright on time, auto-depositited into the same bank account used for filing. The state needs to smarten up a bit, as I received a paper check last December, despite e-filing for years.

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