Do you use direct withdrawal for balances due?

Key tips and advice the working tax pro can use.
#1
CO CPA  
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I've been using direct withdrawal for balances due this year. I haven't used this in the past because it makes me nervous but assuming it works correctly, it is very convenient. Does any one have any feedback on direct withdrawal? Hopefully no horror stories...
 

#2
sjrcpa  
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Just be very careful about the account numbers and RTNs. I triple check.
It's a real mess to fix if you have the wrong info entered.
Other than that it works well. I let the clients decide if this is how they want to pay. More and more are doing this.
 

#3
RowTax  
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Florida
That, and direct withdrawal for estimated payments
 

#4
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Maine
I used to do direct withdrawal for taxes due, but last year I efiled a clients return with direct withdrawal of $10k minutes after she signed it as it was still open on my computer.

She called me 3 minutes after I filed to tell me not to do the direct debit, she paid it herself online.

The IRS got paid twice, and still hasn't sent the money back. Lots of wasted time trying to clear it up.

I now give them instructions on how to open an IRS account or make a direct pay themselves, and take myself out of the loop. I tell them I won't do direct debits any more.

They sometimes forgot that they asked me to schedule the payment for the last week of April, and now I have to listen to an irate, or even worse; a crying client blaming me because their rent check bounced. More wasted time, bad feelings, etc.

Next problem to solve: Is there a standard form we can use to get clients to sign to verify their bank info for direct deposit? I've been making my own with cut and paste because even when I highlight the numbers on the 1040 they still don't check them. One client gave me her telephone number instead of bank account number. And signed the efile authorization.
 

#5
TheGrog  
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RowTax wrote:That, and direct withdrawal for estimated payments


I wouldn't do estimates. A disturbing fraction of people forget to keep enough money, want to change, etc, and it is a huge pain.
 

#6
CO CPA  
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TheGrog wrote:
RowTax wrote:That, and direct withdrawal for estimated payments


I wouldn't do estimates. A disturbing fraction of people forget to keep enough money, want to change, etc, and it is a huge pain.


Yeah I agree on the estimates. I'm not going there!
 

#7
Miami88  
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Ohio
I've done it with my personal return but don't want that responsibility when it comes to clients.
 

#8
CO CPA  
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Tangled Web wrote:I used to do direct withdrawal for taxes due, but last year I efiled a clients return with direct withdrawal of $10k minutes after she signed it as it was still open on my computer.

She called me 3 minutes after I filed to tell me not to do the direct debit, she paid it herself online.

The IRS got paid twice, and still hasn't sent the money back. Lots of wasted time trying to clear it up.

I now give them instructions on how to open an IRS account or make a direct pay themselves, and take myself out of the loop. I tell them I won't do direct debits any more.

They sometimes forgot that they asked me to schedule the payment for the last week of April, and now I have to listen to an irate, or even worse; a crying client blaming me because their rent check bounced. More wasted time, bad feelings, etc.

Next problem to solve: Is there a standard form we can use to get clients to sign to verify their bank info for direct deposit? I've been making my own with cut and paste because even when I highlight the numbers on the 1040 they still don't check them. One client gave me her telephone number instead of bank account number. And signed the efile authorization.


Drake software generates one.
 

#9
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Maine
Someday I am going to switch to Drake.

But for now I'm using Proseries.

It seems like there should be a form for the bank info confirmation, but I can't find one.
 

#10
JAD  
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I don't do it either. Honestly, people can be responsible for making their own payments! I don't want the hassle or the liability if I make a typo.

But I had to handle a $25 payment for a NY form that is required to be e-filed, and you can't e-file it without making payment. I was really irritated that there was no way for me to get out of it. It will be interesting to see if that's where we're at in a few years - where the governments make us do it.
 

#11
sjrcpa  
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More and more states are going that route.
 

#12
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OH
I do not make payments for the vast majority of clients as I do not want the responsibility (or head ache) if something goes wrong or the payment is missed/untimely made
 

#13
CO CPA  
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JAD wrote:I don't do it either. Honestly, people can be responsible for making their own payments! I don't want the hassle or the liability if I make a typo.

But I had to handle a $25 payment for a NY form that is required to be e-filed, and you can't e-file it without making payment. I was really irritated that there was no way for me to get out of it. It will be interesting to see if that's where we're at in a few years - where the governments make us do it.


Some of the state websites are not very user friendly so it takes a lot of my time to explain to people how to do it and then they have questions. I sure hope it goes well this year because I've been doing a lot of direct debits!
 

#14
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The only issue I've ever had is direct debits from savings accounts getting rejected, and then having to scramble and instruct the client to pay via direct pay. Because of that I now strongly advise using checking accounts for direct debits. The client still has a choice, but basically I'm saying: "If you use a savings account for a direct debit there is a high chance something is going to wrong. If something does go wrong, you were warned about this and we will be billing for remediation." No one uses a savings account for direct debits when you put it like that. :)

Clients sign the Drake output that includes the account info and expected debits and deposits as part of their efile authorization package. If they provided incorrect info it's on them (and we'll be billing to remediate). I do more direct debits and direct deposits than not. It's by far more efficient than providing vouchers with instructions or instructions for direct pay or a state payment portal. I ask for their preferred account info in my annual questionnaire so we can input it on the first pass.

Return payments or deposits only. Not estimates. That's probably a disaster waiting to happen.
 

#15
CO CPA  
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ManVsTax wrote:The only issue I've ever had is direct debits from savings accounts getting rejected, and then having to scramble and instruct the client to pay via direct pay. Because of that I now strongly advise using checking accounts for direct debits. The client still has a choice, but basically I'm saying: "If you use a savings account for a direct debit there is a high chance something is going to wrong. If something does go wrong, you were warned about this and we will be billing for remediation." No one uses a savings account for direct debits when you put it like that. :)

Clients sign the Drake output that includes the account info and expected debits and deposits as part of their efile authorization package. If they provided incorrect info it's on them (and we'll be billing to remediate). I do more direct debits and direct deposits than not. It's by far more efficient than providing vouchers with instructions or instructions for direct pay or a state payment portal. I ask for their preferred account info in my annual questionnaire so we can input it on the first pass.

Return payments or deposits only. Not estimates. That's probably a disaster waiting to happen.


This is the route I've been taking too and it seems to be working great.

What am wondering though is how I'm alerted if a payment doesn't go through. I haven't had that happen...does Drake notify you a similar fashion to an efile rejection?
 

#16
sjrcpa  
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You don't get notified if a payment doesn't go through. The client gets notified by the IRS or state and/or their bank. Sometimes they tell you about it.
 

#17
CO CPA  
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sjrcpa wrote:You don't get notified if a payment doesn't go through. The client gets notified by the IRS or state and/or their bank. Sometimes they tell you about it.


Yikes. That makes me nervous. Maybe I should add something to my transmittal to the tune of:
"It is your responsibility to confirm the direct withdrawal payment is processed successfully by the tax return due date. I have no way of confirming this on my end and I do not receive notification if a payment request is rejected by your bank. If the payment is not made by the due date of the return, penalties and interest will be assessed by the IRS/state on the balance due."
 

#18
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In my closing email I instruct the client to monitor the account, and please email me if the direct debit does not come out by such and such date.

Such and such date is usually a week after the expected debit date. I never use the date of debit. The IRS and my state have been known to debit a day or two after the expected debit date and apply it timely. The last thing I want is my inbox flooded by panicking clients because the debit didn't come out on the exact date expected.
 

#19
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WA State
I've never used this method through my software and don't ever expect to.
IRS direct pay is so easy to use. It's a much better alternative.
I had a client share with me that you can schedule payments as far as 12 months out with Direct Pay. I'm going to do this with my own 2023 estimated payments and have been suggesting to certain clients they can do the same.
~Captcook
 

#20
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Interesting. As far as return and extension payments go, I've found that direct debit is not only the most efficient for me but also eliminates error on the client side.

I do agree that IRS Direct Pay is the best option for estimates.
 

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