Colorado’s tax refund “warrants” are confusing some taxpayers, prompting bank fees

State continues to bypass direct deposit when fraud risk is higher


Rogelio V. Solis, Associated Press file
In this Feb. 15, 2018, photo, Susan Prendergast, reference supervisor at the Eudora Welty Library, in Jackson, Miss., adds additional federal tax filing information booklets on a shelf. The U.S. Treasury Department and the Internal Revenue Service on Wednesday, Feb. 28, 2018, issued an online calculator for figuring whether money is being set aside, to avoid facing a huge tax bill for 2018.

 

The Colorado Department of Revenue, for the fourth year in a row, is flagging certain state tax returns and issuing refunds in those cases via paper checks rather than a direct deposit.

But in a letter accompanying those paper refunds, the checks are referred to as a “warrant,” which is confusing some taxpayers. So, too, is a suggestion taxpayers go directly to a Wells Fargo branch if they want to avoid fees their financial institution might charge.

Wells Fargo holds the state tax refund money and will cash the warrants/checks for free. The state adds that it isn’t responsible for any fees charged by another institution.

Barbara Cooper, in a letter to the Boulder Daily Camera, complained that her credit union automated teller machine rejected the warrant when she tried to deposit it. She then went to a Wells Fargo location, cashed the warrant and brought the money back to her credit union to deposit.

“My question to the state revenue office, as well as to Wells Fargo, is what kind of foolishness are you playing at? This is our money, we have a right to receive it in the most convenient way possible!” she complained.

Governments use warrants as an alternative to checks to draw from a Treasury account. But the warrants clear through the banking system like a check.

“Many financial institutions throughout Colorado have been cashing or depositing these checks for taxpayers in the past few years. These checks should be able to be cashed or deposited by any financial institution, but some may charge a fee to cash or deposit a check that they did not issue,” said Mim Mirsky, a spokeswoman for the revenue department.

As to why the ATM that Cooper used rejected the warrant, that is an issue she should take up with her credit union, Mirsky said. She adds the Colorado Department of Revenue plans to reword its letter to avoid confusion.

The chief reason the state continues to issue paper warrants/checks when people have requested a direct deposit is to cut down on tax fraud. Someone who files a tax return using a stolen identity can direct where the refund goes electronically.

If a return raises red flags with revenue officials, the state will send out a paper check to the address of record. That in turn will require someone to go to a teller and show identification or use an ATM card with a PIN.

Mirsky said just because a taxpayer received a paper check in the mail instead of a direct deposit doesn’t mean his or her identity has been compromised. But there is one scenario a taxpayer should be concerned about: a check arrives when they haven’t filed a tax return or when they filed but weren’t expecting a refund.

In that case, they should call the department’s fraud hotline at 303-205-8292, Mirsky said. They should not cash the check.

 

Article From:- https://www.denverpost.com

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