[IMGCAP(1)]Technological advances have made direct deposits of refunds, paychecks and other items enormously popular in recent years. The system normally works very well, and can usually be relied upon as a way to transfer money quickly and easily between parties. However, if something goes wrong at any point in the process, my experience has shown that correcting the matter can be almost impossible, and chances are very good that someone will lose his money.

My firm prepared an income tax return this past filing season which, at the client’s request, was submitted electronically to the Internal Revenue Service with instructions that the $15,452 overpayment be deposited directly to the client’s account at Wachovia Bank. The next day, the client called and said the bank account number furnished was incorrect. In fact, the account number submitted only had 10 digits, and all of Wachovia’s accounts have 13.

I immediately called the IRS and was informed that this type of error occurs occasionally, and the deposit would be rejected by Wachovia Bank when they discovered that the account number did not match the name on the account. After that the IRS would issue a check for the client’s refund.

That’s not what happened. Wachovia added three digits to the account number and put the money into someone else’s account. The bank made no effort to check the name on the account to see if it matched that of our client. The lucky recipient withdrew all of the money in less than three weeks.

Wachovia has steadfastly refused to credit the money to our client’s account. The bank maintains that it is not required to monitor the accuracy of direct deposits (even though I think it is — especially if it chooses to alter the account number), and would deposit the funds to our client’s account only if it could recover the money from the other individual. Not surprisingly, the bank has not been able to locate that person. How hard they tried is in question.

After Wachovia Bank refused to correct the situation, I contacted the IRS to see if they would reclaim the money and issue a check to our client. They would not help, stating that the matter was between our client and the bank. The client also filed a complaint against Wachovia Bank with the Comptroller of the Currency. That was more than five months ago and is still pending. I’m beginning to doubt that any action will be taken. I called the FBI to inquire about prosecution of the person who received the money. They agreed that refusal to return the money was a felony, but $15,452 was below their threshold and would not investigate it.

Meanwhile, our client is out his refund. It’s a reminder that, although direct deposit is fast and convenient, if something goes wrong there may not be anyone around to help. That’s especially true if you use Wachovia Bank. As a result of this experience, my firm will discourage the use of direct deposit in the future. It’s safer to wait a few days and get a check.

Dan Adams, CPA, has maintained a tax and accounting practice in The Woodlands, Texas, since 1985.


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