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Category: Tax
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Experience:  CPA with tax experience.
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I need to know what to do I referred a great friend of mine

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I need to know what to do? I referred a great friend of mine to my cpa that handles my business taxes and he worked on a refund due her he put the money into my business account without my consent or knowledge in may and i thought it was my income tax return my friend just found out it went into an account tonight and called me with my account number i dont know what to do now my cpa obviously made a big mistake and i dont feel that i should have to take responsibilty for it.

Thanks for your question. Unfortunately, these mix ups do happen. It can be difficult to straighten them out but it can be done.

First, if you still have the money in your account, you will need to call your bank's direct deposit department and ask your bank to return the incorrect refund to the IRS. They can do this electronically and it will be taken out of your account quickly and returned to the IRS so that the IRS can fix the problem. If you have already spent some of the money, you will need to deposit enough money to cover the amount of the refund that will be returned.

Then, your CPA will need to call the IRS and explain the problem at 1-800-829-1040. You or your friend may also call the IRS. It sounds like your CPA just put your bank information in the direct deposit section of her return by mistake or sometimes the IRS makes mistakes and puts in the wrong info. The IRS will then correct the error and issue a paper check and mail it to your friend. They cannot correct the direct deposit information and send it out by direct deposit again due to security issues.

Hope this helps,

Edited by JK_CPA on 11/3/2009 at 3:10 AM EST
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Customer: replied 7 years ago.
Due to the fact that this deposit was in May I do not have the money available at all. And also due to the fact that I thought it was my refund, I spent the money and do not have it to replace. I wish I did, because I would take your advice. I have not told my friend nor the accountant because I did not know that the account the irs deposited it in was mine for sure until she read off the numbers to me the second time. I then recognized the last four digits and realized it was my old account that is closed now since August. How can we resolve this without anyone getting financially hurt or in legal trouble. I don't feel I should be in trouble for a misunderstanding. I honestly thought the money was my refund, and that we got more money. The accountant could have made a mistake and the irs fixed it. I am not smart when it comes to taxes and thats why we hired a cpa to take care of this stuff for us. The accountant obviously put her money into our business account accidently, and now what do we do? We cant pay that money back all at once we don't have it and are doing all we can to save our house from foreclosure right now. And i honestly feel it is up to the accountant to resolve his mistake and fix this for us, even if we have to make payments. But he should take some responsibility. This is really earth shattering to small people like us and I don't know were to turn. I'm sick to my stomach, and feel so sick. I'm not a thief and feel so very bad. Moreso I have learned a valuable lesson from this, and do need to find a more competent cpa of course. Next time I get extra money i willknow to ask first where did it come from. How could he get money that belongs to someone else put into our business account i dont know, but i didnt even know that was possible to do. I couldnt even have my sisters refund put into my primary account at another bank because she wasnt on the account.
Well, if you can't pay it back right away, go ahead and just do what I said in the 2nd paragraph (call IRS). Your CPA should do this actually if it was their fault. Also, in order for your friend to get her tax refund, you will be getting a balance due on your account. This is known as an erroneous refund balance due. This is subject to no penalties and much less harsh collection procedures by the IRS but interest does accrue if not repaid in 21 days after the IRS asks for the money back. You could get on an informal payment plan paying like $25/month. However, I suggest you ask your CPA to pay the IRS or reimburse you for the error if it was their error. CPAs generally have liability insurance.

Anyway, good luck.

Edited by JK_CPA on 11/3/2009 at 4:26 AM EST