All right! It’s finally tax season. You’ve verified your electronic filing identification number (EFIN), preparer tax identification number (PTIN) and employer identification number (EIN). You’ve met with an approved financial institution for Intuit® Pay-by-Refund, and now clients are streaming in the door wanting to take advantage of a worry-free payment and flexible disbursement options. You are excited to have streamlined your receivables and the ability to offer new payment options to your clients. But, what about those darn refunds that don’t fund?
There are many excellent benefits for you and your clients to using bank products such as Intuit Pay-by-Refund. It’s a hard fact that in the United States, many taxpayers, even those with decent incomes, still live paycheck to paycheck. Young and old alike can benefit from filing their federal taxes early, while bank products can alleviate some of the stress over the payment with no out-of-pocket upfront costs.
Pay-by-Refund offers them this convenience while adding additional benefits to your firm. In most cases, tax professionals delight in knowing their preparation fees are collected from the tax refund and deposited directly into their business account. The majority of financial institutions that offer bank products also provide marketing kits to help teach taxpayers about the service. As a result, many preparers see Pay-by-Refund as a way to grow their practice while delighting their customers.
With all of the goodness around Pay-by-Refund, why is that every once in a long while, there comes along a tax refund that just doesn’t fund? The implications are that the tax pro doesn’t get paid, which could potentially damage relationships as well as force the write-off of outstanding invoices. When I talk with representatives from financial institutions, governing bodies and experienced tax preparation firms, the lack of funding generally arises from the taxpayer owing the IRS. Tax debt such as child support, back taxes and other liens can all be culprits that prevent the bank product from funding. Luckily, experienced firms have shared their best practices to avoid such occurrences, and I’m happy to share one firm’s advice with you now.
This advice comes from a firm in California who says it all falls back on the client relationship and understanding if Pay-by-Refund is a good fit. There are several questions to ask during your tax preparation pre-interview that will help you avoid pitfalls. The first is to learn if the client has owed taxes in the last three to five years, or if they have received refunds from each filing. Owing back taxes is one of the leading causes of non-funding. You’ll also want to know if your client has children who do not live with them because this could open a discussion of child support.
Asking questions about liens can be more difficult and takes some finesse. The result, however, is a more clear understanding of your taxpayer’s financial and tax situation. Bank products are not for every customer every time. Much like credit card processing, some taxpayers still prefer checks. However, knowledge is always the key, and armed with facts, it quickly becomes clear that we can take advantage of the vast number of benefits for Pay-by-Refund that outweigh the limited potential of a tax return refund that doesn’t fund.
Discover how to integrate Pay-by-Refund into your tax practice.