Cincyblogs.com
Showing posts with label debit. Show all posts
Showing posts with label debit. Show all posts

Saturday, November 17, 2012

State Tax Refunds And Debit Cards

I have noticed that more and more states are increasingly requiring individual income tax refunds to be electronically deposited or received on a debit card.
What got me thinking about this is Virginia’s decision to require electronic refunds, beginning with the 2013 tax season.  One can have his/her refund electronically deposited or loaded onto a debit card. There will be no physical checks.
Virginia is joining Louisiana and Oklahoma with its electronic refund/debit card policy.
I find myself recalling IRS issues with identity theft and debit cards this past filing season. The IRS has estimated that more than $5 billion was refunded to identity thieves in 2011.   A majority of these cases used direct deposits, including debit cards. Thieves prefer debit cards to a paper check, which may require a photo ID matching the taxpayer’s name to cash it. Makes sense.
So what does the identity thief need? He needs a name and social security number, preferably from someone who will not be filing a tax return. An address would also be nice. Find a foreclosed house. Maybe put a new mailbox on it. The thief fills out a tax return, making up the wages, withholdings and so on. As long as he is the first person using the identity for the tax year, it is – as one U.S. Attorney phrased it – a “remarkably simple crime to commit.” Couple this with a hard-to-trace debit card, and the IRS is almost sending cash through the mail.
Do you find yourself wondering how it is cheaper for a state to issue debit cards rather than a physical check? Say that Kentucky issues 1,200,000 refunds using physical checks. Kentucky has the cost of the checks, plus equipment, personnel costs and postage. If Kentucky associates with a debit-card-issuing institution (I am thinking the to-be-formed Hamilton Bank of the Bluegrass, as an example), they instead send one transfer to The Hamilton Bank, as well as a data base of the individual refunds. No mess, no fuss. One can see the savings to Kentucky.
I would – I mean The Hamilton Bank of the Bluegrass would – issue the debit cards. How does The Hamilton Bank make money? First, there would be the float while the debit cards carry balances. Second, there could be merchant fees upon use of the card. Third, The Hamilton Bank would allow one to withdraw cash, but only at conveniently-located-Hamilton-Bank-ATM locations in greater Cincinnati, northern Kentucky and the Bluegrass. Any other ATM’s would trigger a fee. Fourth, The Hamilton Bank would charge fees for inactivity, replacement cards and etc.  I am thinking this could be a sweet deal for me, er… I mean The Hamilton Bank of the Bluegrass.
Kidding aside, I do understand the states’ interest in moving tax administration to an all-electronic format. Practitioners have already seen some of the advantages of electronic processing: verification of receipt and filing, record of filings and payments, transcript deliveries and etc. Electronic refunds fit into this structure. However, the government cannot electronically refund to someone who does not have a bank account, which is how we wind up talking about preloaded debit cards.

Tuesday, November 6, 2012

Do You File Taxes With South Carolina?

Heads up if you file tax returns with South Carolina.

On October 26 the S.C. Department of Revenue announced that approximately 3.6 million social security numbers and almost 400,000 credit and debit card numbers were compromised.  



Government officials emphasized that no public funds were accessed or put at risk. No word from government officials on your whether your private funds were put at risk, though.

On October 10 the S.C. Division of Information Technology informed the Department of Revenue of a potential cyber attack. On October 16, investigators discovered two attempts to hack the system in early September. They later discovered that a previous attempt was made in late August. Government officials believe they have closed the vulnerability in the system.

If you have filed a South Carolina tax return since 1998, please visit protectmyid.com/scdor or call 1- 866-578-5422 to determine if your information is affected. If so, you can immediately enroll for free in one year of identity protection service with Experian.

Tuesday, February 14, 2012

Form 1099-K Reconciliation Cancelled

The IRS has decided that businesses will not be required to reconcile their gross receipts with merchant card transactions reported on the new 1099-K form.

Steven T. Miller, IRS deputy commissioner for services and enforcement, wrote to the National Federation of Independent Business that no reconciliation will be required on 2012 or future business tax returns. Last October the IRS had earlier said that no reconciliation would be required for only the 2011 tax returns.

In the way of history, the Housing and Economic Recovery Act of 2008 required the IRS to begin collecting a new Form 1099-K from payment-settlement entities, such as credit card companies, for merchant transactions such as credit and debit card payments. The payment settlement entity is required to issue a 1099-K to a merchant if the merchant’s business for the previous year exceeded either $20,000 or 200 transactions.

Why would businesses complain? Well, for one, if the taxpayer identification number and legal name do not match with IRS’s files, there is back-up withholding of 28% of the transaction. How is the business to account for refunds or returns? For sales taxes? How is the 1099-K to be reconciled with accounting systems which are geared to track sales by product or type, not by payment type? How will one account for fiscal years, when the 1099-K’s will all be on a calendar year? And who is going to pay for the accountant to reconcile all this nonsense?

Tuesday, June 21, 2011

Signing Up for Social Security?

Those applying for social security beginning Monday, May 2, will have to select an electronic payment option – either direct deposit or a debit card. The debit card can be reloaded every month. One has to be careful, though, as fees will apply. For example, there is a $1.50 charge for transferring from the card to a checking or savings account.

If you are already receiving social security, then you have two more years – until March, 2013 - to make this decision.