wrote:

- quote -

My bank doesn't even return physical checks, so how could I
even tell that one was cashed by the wrong payee? All I'd
observe is that the check was paid a week after I wrote it,
for the correct amount.

Seth

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"Stuart O. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Thanks for the reminder on the signing point.

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"BMS" <mcfared[at]comcast.net> wrote:

- quote -

You're right, the bank is not required to have the check
endorsed at all before it is deposited. They can, in
effect, endorse it themselves. But bankers have become
overcautious of late, even doing things which they should
not if they think it might avoid a problem.

The other thing you could have done to avoid the problem
would have been to have signed your wife's name for her. As
long as she gives you authorization to do that (which need
not be in writing), that would constitute her signature
under the Uniform Commercial Code.

Stu

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"Steven Caldwell, CPA LA" <StevenCaldwellCPA[at]yahoo.com> wrote:
- quote -

If you are looking for security, go to the local community
bank. I got a call because the endorsement was wrong,
according to the clerk. It was a deposit into the ATM for a
child care rebate check. The check was made payable to both
my wife and me. I endorsed it for deposit only and signed it
myself. The bank said that was wrong and my wife would have
to go down to the branch and sign it. My position, with now
the clerk and the branch manager, that was enough of an
endorsement given the check was deposited and the account is
set up that either one of us can sign a check without the
other.

They were concerned that the issuer, IRS, would review the
endorsement and return the check and I would be hit with
fee. As this thread has beared out, I would hit the lottery
before the Feds reviewed an endorsement.

But I was impressed by the community banks attention to detail.

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Steven Caldwell, CPA LA wrote:

- quote -

No doubt about that. Amazing what banks think they can get
away with these days.

- quote -

Got to disagree with you there. However, client does bear
some responsibility for failing to reconcile his bank
statement and make sure on a monthly basis that payees
cashed the right checks.

Cheer$,
Harlan Lunsford, EA in LA

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:

- quote -

I am afraid this could happen at ANY bank. No bank of any
size "looks" at any checks being processed because of the
automation they all have now. So, I am afraid changing
banks would change nothing.

I guess technically the bank could be held responsible for
paying a check to the wrong payee. But, IMHO, the client
bears a lot of the responsibility for mailing the checks to
the wrong payees.

I remember in a past life where I did audits of numerous
banks with another firm I was then with. A lot of banks and
all of the smaller ones still did manual processing of
checks although it was somewhat automated. Even then one
would have to be wasting time reading all of the checks to
have caught this one. And IF they were doing that, they
would NEVER complete their work in the time alloted.

If it were MY client, I would advise him to do nothing and
just file based on the amounts that were credited by the
Federal & State authorities.

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"Harlan Lunsford" <hlunsfordns[at]bellsouth.net> wrote:

- quote -

My first checking account. Doesn't seem that long ago. I
had to open my first account in a different bank from my
Dad's because our signatures were almost identical. And
back in the Dark Ages, it was entirely possible that an
actual human being might make the mistake of mixing our
checks up between our accounts.

Jo

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:

- quote -

It was the banks where the checks were deposited that should
have caught it. But as a practical matter their volume for
the tax agency depositors is likely so high that they don't
look carefully, if at all, at the checks.

Everything else is pretty much completely automated. I've
seen checks go through and get paid without a signature. As
long as no one complains, no problem. I guess the ones that
actually shouldn't have been cashed are so few and far
between that the banks figure it's cheaper to take the hit
than to have every check looked at.

Stu

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Harlan Lunsford wrote:
- quote -

I thought the banks' responsibilities are set by the Uniform
Negotiable Instruments Acts, which are state laws. A few
years back I contacted the person in charge of bank
enforcement with the Richmond Federal Reserve Bank he said
these laws had not been repealed. While the banks may imply
to customers that they do not have any responsibility they
still do. If banks decide to save money by not looking at
endorsements they do so by accepting the resultant losses
that are caused for their customers. I hope the federal
government stays out of this area.

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D. Stussy wrote:

- quote -

That sounds like advice I'd give about the banks. But as a
practical matter, I've seen it happen; had it happen to me
(not tax checks though), and with their processing methods
it will happen again and again.

Now I read where the congress passed a bill and president
signed, giving banks freedom to process checks faster via
electronic images, meaning physical checks will no longer
have to be transported by Brinks, Wells Fargo, etc, however
they do it.

Anyone remember his first checking account? no little
square numbers at the bottom of the checks, and you wrote in
your own check numbers on the blank checks supplied at the
bank's counter? When you took your hat off when you came
into the bank to ask for a loan? Where you got one point
credit score if the bank did business with your father?
Two points, if they knew your grandfather? Maximum two
points FICO?

Sigh.

cheer$,
Harlan Lunsford, EA in LA

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"Harlan Lunsford" <hlunsfordns[at]bellsouth.net> wrote:
- quote -

It's really not easy to manage to get retired from tax
preparation is it? I've been asking/begging long time
clients to go away for years.

Physically, if you can get up in the morning and find the
computer on switch and the coffee pot, you are pretty much
good to go.

However, in addition to several medical problems, I've lost
my hearing almost entirely. Email and fax machines help
with getting information, but they do not help one keep up
with changes in the tax law. Continuing education became
the last insurmountable obstacle. Self study really doesn't
cut it and the last class I took I could not hear anything.

And being self-employed working alone and unable to use a
telephone has its drawbacks.

Jo

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Jo Firey wrote:

- quote -

What's to handle? Since AMT applied (before the error), the
1099-G for the subsequent year is going to be ignored anyway
- no tax benefit, so the recovery isn't includible.

I'd also advise the client to change banks since the bank
processed payments to parties who are NOT the ones on the
face of the check nor was there an endorsement to a third
party. Such a bank is lacking sufficient internal controls
regarding customer accounts.

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Jo Firey wrote:

- quote -

With the tax benefit rule, I doubt there's really going to
be any impact of this one. The AMT simply "caps" the
benefit of deductions, so additional state tax is not going
to change the tax due on the return. Also, for the
following year the tax refund that is taxable is limited to
the amount from which a tax benefit was derived--again, this
"extra" refund isn't going to increase the tax benefit and,
as such, is also a nonevent.

--
Ed Zollars, CPA
Phoenix, Arizona

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Jo Firey wrote:

- quote -

What's to handle now? except maybe a 1040X to claim the
added schedule A deduction.

As an aside, taxpayer was negligent in not checking who
cashed what checks. I've seen it happen before, and after
the switched checks are cash, no matter who is payee,
nothing can be done. It might of course be some mitigating
circumstance for waiving a penalty.

Also, why did he overpay during the year? One can vary the
estimated amounts each quarter you know. I do that for my
clients to make sure that by Jan 15th they're JUST about on
the money. Of course later may come the 1099-div from
mutual funds! lol

retired you say? why? );

Cheer$,
Harlan Lunsford, EA in LA

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"Jo Firey" <jofirey[at]netzero.net> wrote:

- quote -

If you did not get a tax benefit for the state payment,
either because you didn't itemize, or because of AMT, it's
not taxable income. Attach a schedule to the return
explaining why you're not including the state refund.

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A high income taxpayers has a bad year. He paid estimated
based on prior years income and has overpaid his state tax
by about $30,000. This creates an AMT situation. Bad
enough so far. After filing taxes the taxpayer is informed
that he is overpaid by another $25,000 on his state taxes.
It seems that one of his federal estimates ended up in the
state estimate envelope and the state happily cashed it. The
smaller state estimate was cashed by the IRS. Now what?
The amount on the Sch A didn't include the additional amount
the state received. (The check wasn't even made out to
them) But the refund will certainly be reported by the
state on their 1099.

I'm retired. And glad of it. But curious how others would
handle this?

--
"Dogs may have kept us company on the hunt, but it was the cats who
insisted we invent houses and discover fire." -- Khiem Tran

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