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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121189  
Subject: bank bounced check to irs Date: 4/24/2004 4:42 AM
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Long story short.

Because we were victims of ID theft this past winter, we cancelled our existing business checking account and opened a new account with the same bank in January. Been with the bank for 30+ years?

I made a LARGE deposit 4/14 for our seasonal business. That deposit was one check which we received from our employer who acts as a collection agent for our billings to our customers. (So, we are dual status independent contractors with an employee/employer relationship with the same entity.) It was a major annual billing of fees.

I received a letter from the bank 4/16?...telling me that the deposit had been placed on hold for 8 days! because it was unusual activity for the account. (The account was new....duh.) This had NEVER happened in 30 years on the old account (but that 30+ year history is gone now).

I called today to inquire about the letter received and asked if any checks had been returned during the time that the deposit was on hold. Yep. 1st quarter estimate to IRS.

I was told the deposit was too large...but they couldn't tell me what qualified as too large. I have to walk in deposits to bank manager when too? large? so it (the deposit hold) doesn't happen again.

I called our accountant...and he said, "oh god, no." The best he could tell me was to wait for the IRS either to send the check back through to the bank or to return the check to us. We'd just have to wait to see what they do. He didn't understand why a hold for 8 days since the check was drawn on a local bank by a well known entity in town.

Now what??? Any other suggestions? Do I have any recourse against the bank?

I'm irritated to say the least. Thanks for listening and any thoughts.

Lethean



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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71620 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 8:12 AM
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Because we were victims of ID theft this past winter, we cancelled our existing business checking account and opened a new account with the same bank in January. Been with the bank for 30+ years?

Largely irrelevant now that everything is computer processed.

I made a LARGE deposit 4/14 for our seasonal business. That deposit was one check which we received from our employer who acts as a collection agent for our billings to our customers. (So, we are dual status independent contractors with an employee/employer relationship with the same entity.) It was a major annual billing of fees.

I received a letter from the bank 4/16?...telling me that the deposit had been placed on hold for 8 days! because it was unusual activity for the account. (The account was new....duh.) This had NEVER happened in 30 years on the old account (but that 30+ year history is gone now).


This may have happened in the past, but you might not have been notified. Large (you haven't said how large and I forget the breakpoints) deposits are routinely placed on hold until they clear. Deposits to new accounts are closely scrutinized because of the potential of bank fraud.

I called today to inquire about the letter received and asked if any checks had been returned during the time that the deposit was on hold. Yep. 1st quarter estimate to IRS.

I was told the deposit was too large...but they couldn't tell me what qualified as too large. I have to walk in deposits to bank manager when too? large? so it (the deposit hold) doesn't happen again.


Here's where you should push for an answer. There is a maximum schedule for holding deposits established by some legal authority (FDIC rule, federal/state law?) based on the size of the deposit from each source and where the paying bank was located. IIRC, something like $200 must be made available the next business day, a larger amount 2 business days later and the balance within x days. I don't remember the specifics, but I remember my bank making a big deal of this when it changed. Banks can release funds quicker if they wish, but they can't hold them longer.

I called our accountant...and he said, "oh god, no." The best he could tell me was to wait for the IRS either to send the check back through to the bank or to return the check to us. We'd just have to wait to see what they do. He didn't understand why a hold for 8 days since the check was drawn on a local bank by a well known entity in town.

Because everything is done by computer and a human doesn't look at it unless they know to look at it.

Now what??? Any other suggestions? Do I have any recourse against the bank?

Unless they violated some banking law, I doubt you have much recourse other than to (threaten to) move your business elsewhere. Whether this will get you anything is anyone's guess.

Ira



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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71623 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 8:48 AM
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Don't know what the IRS will do about the returned check, but as far as the bank's action goes, that's routine for large deposits. On several occasions in recent years I've made large deposits into my credit union account. In each case, something like $500 was made available immediately, another $4500 was available in three days, and the full amount became available in eight days. The fact that the check is drawn on a local bank is immaterial. I suspect that large treasury checks (i.e. U.S. govt checks) might be exempt from something like this, but maybe not... And Ira's right - you ought to be able to speak with a bank manager and find out what the rules are: how big deposits have to be before they get this treatment, and what the formula is for determining when and in what amount funds will be released for your use.

Lorenzo

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71624 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 9:44 AM
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AS Ira and Lorenzo said, thie withholding is normal and you can't really question it, but you might get some action on future checks from this payer by talking to the manager. Usually the payee (IRS) redeposits the check and it goes through since it is then after the 8 days. Usually the bank will pay any returned check fees and other penalties for the withholding.

A friend of mine had this happen on a 15+ year account tha processes over $1 mil per year and has an average ballance of about $20K with routine infusion from the same payer of $10K to $50K. So he left, switched his accounts in a huff, changed everything and went with a different bank that assured him this wouldn't happen and had whatever you call the electronic payment from your computer? Well, they screwed up and didn't pay several payments he ordered and then when that got cleared up (after CONSIDERABLE consternation and wasted time, withheld payment due to one of the routine deposits being held up for 8 days as happend to you and was the reason he changed banks.

Moto: Be carefull you don't get into the withheld rules, but it usually doesn't matter, and pay your bills by mailing your own checks and keep track of mailing dates by writing the check # and date and amount on every bill, and be particulary careful if you're paying 0% interest credit cards. ed

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71625 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 11:49 AM
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I called our accountant...and he said, "oh god, no." The best he could tell me was to wait for the IRS either to send the check back through to the bank or to return the check to us. We'd just have to wait to see what they do. He didn't understand why a hold for 8 days since the check was drawn on a local bank by a well known entity in town.

Now what??? Any other suggestions? Do I have any recourse against the bank?


I'm surprised the accountant had such a dramatic reply, I would never talk that way to a client! It's not the end of the world and there are lots of solutions.

There probably isn't any recourse against the bank, it's pretty standard practice....that said, the bank should be willing to write a letter to the IRS explaning/confirming what happened...if you get a notice from the IRS.

The IRS isn't, IMHO, really the "bad" guys we tend to make them out to be. They "forgive" and credit penalities and interest assessed that were caused by "normal mistakes". I've found them to be very reasonable.

We had a payment they said they didn't get...we didn't get the check back, it didn't clear the bank. We just had to show them our bank statement with the missing check number (showing it wasn't returned to the bank), and a copy of the stop payment on the check. They credited all penalities and interest.

They do send those horrible letters, and always tell you on the phone they can attach your assest...but that is part of the rules to let you know what can happen.

Jean




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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71629 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 8:45 PM
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jean

<<<I'm surprised the accountant had such a dramatic reply, I would never talk that way to a client! It's not the end of the world and there are lots of solutions.>>>

He didn't shout it. He kind of said it under his breath. He's old and tired, I think. Not in good health either.

<<<that said, the bank should be willing to write a letter to the IRS explaning/confirming what happened...if you get a notice from the IRS.>>>

They will write a letter once we hear from the IRS.

<<<The IRS isn't, IMHO, really the "bad" guys we tend to make them out to be. They "forgive" and credit penalities and interest assessed that were caused by "normal mistakes". I've found them to be very reasonable.>>>

Beg to differ.

Our check to IRS mailed with the return a few years ago, didn't clear as it should have. Knew something was wrong. The, we had an envelope arrive from the post office marked "unrecovered mail" 6 months after it had been mailed. Inside was our fed tax return (opened) in the original envelope, postmarked 4/15, and also marked short 3 cents postage. The IRS wouldn't budge. We paid a couple thousand in interest. They waived the penalty. Same day the acct was talking to them on the phone, I was reading WSJ article about the "new, friendlier IRS". We didn't see it. The lady agent was very unpleasant. Would NOT budge on it...except to waive penalty.




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Author: 500PSI Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71632 of 121189
Subject: Re: bank bounced check to irs Date: 4/24/2004 9:28 PM
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lethean I would ream my bank. When we first opened our account we had the routine hold. However, they would always tell me explicitly when I made deposits if there was a hold. Now they generally don't hold even large checks (50K plus) because of the activity of the account. If they did put it on hold, I would expect them to tell me. In addition, even when they have been on hold in the past, I have been able to speak to my business banker who has the authority to take it off hold. I bank with Wells Fargo.

In my opinion, your bank should have notified you of the hold, in the worst case they should be willing to write a letter to the IRS explaining the problem and waive any associated bank fees. In the best case they would pay the IRS penalties (doubtful).

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71634 of 121189
Subject: Re: bank bounced check to irs Date: 4/25/2004 1:01 AM
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The IRS wouldn't budge. We paid a couple thousand in interest. They waived the penalty.

Unfortunately, that is all they could do. Congress has tied their hands and won't allow them to waive interest. They have the freedom to abate penalties, but not interest.

--Peter

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71635 of 121189
Subject: Re: bank bounced check to irs Date: 4/25/2004 7:37 AM
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The IRS wouldn't budge. We paid a couple thousand in interest. They waived the penalty.

Unfortunately, that is all they could do. Congress has tied their hands and won't allow them to waive interest. They have the freedom to abate penalties, but not interest.


Correct, and it's a logical position. You can look at it as either the government's attempt to recoup the interest it could have earned on the money in the time between the due date and the final payment date or to prevent your profiting from the interest you could have earned.

Ira

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Author: them Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71640 of 121189
Subject: Re: bank bounced check to irs Date: 4/25/2004 5:27 PM
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Banks can release funds quicker if they wish, but they can't hold them longer.
-------
Just as a kibitzing data-point of caution, we have experienced a bank doing just that.

There is a form that is required by law to be posted within the bank stating the schedule, pretty much as you relate - and there was. The only problem is that this banks manager was ignoring it, and even when their violation of their own required-by-law policy was pointed out to the manager, they refused to budge. It took a phone call to the regional manager of Wells Fargo, and a move to a different branch, to get them to follow their own posted policy.

FWIW, it was a large, but not huge check (4 figures) from a state university, that the regional manager said should have been no problem whatsoever.

I only mention this to bring home the point that when you are relying on others in a time-sensitive situation to always give it more time than you think is necessary - the more critical, the more time.

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71641 of 121189
Subject: Re: bank bounced check to irs Date: 4/25/2004 8:45 PM
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ira

<<<Banks can release funds quicker if they wish, but they can't hold them longer>>>

http://www.federalreserve.gov/pubs/regcc/regcc.htm

Regulation CC seems to cover it. The bank "may" but is not REQUIRED to delay availability ... So now I feel like they lied to me, too.

Guess I'll be speaking to them again, in person this time. Pretty hard to let it drop without knowing where I stand with future deposits...









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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71642 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 12:21 AM
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<<<Banks can release funds quicker if they wish, but they can't hold them longer>>>

http://www.federalreserve.gov/pubs/regcc/regcc.htm

Regulation CC seems to cover it. The bank "may" but is not REQUIRED to delay availability ... So now I feel like they lied to me, too.

Guess I'll be speaking to them again, in person this time. Pretty hard to let it drop without knowing where I stand with future deposits...


I'm not sure why you chose to respond to my quoted statement above with this post because there is nothing in Reg CC which contradicts my statement, not anything which would lead me to conclude that they lied to you. As I stated, any bank can choose to waive its hold policy to favor the depositor, but it can't extend it except as allowed by Reg CC.

The Reg clearly states the conditions under which they can hold deposits and yours met several of them (size, new account, perhaps not personally presented to bank). It also states that certain holds require written notice to the account holder and that the written notice be issued within 1 business day of the deposit. They seem to have done that.

The Reg also sets different hold periods for deposits presented in person vs. by mail or ATM. My rule of thumb is that any time I think there might be a timing problem, I always deal with it personally and speak to a manager (at the bank, at the destination of the payment, at the source of a deposit) so that I know people are looking out for anything that can go wrong. Even with all this caution, I've been burned several times. Best lesson is to avoid time critical financial transactions. (Now if only I can learn that!)

Ira

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71643 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 10:14 AM
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ira

I wasn't disagreeing with you AT ALL. I was merely providing a link to the rules which substantiated what you said. Your comment helped clarify the rules for me.

The bank told me that they were REQUIRED by federal rules to hold the deposit for 8 days. That clearly is NOT true.

Further, I had NO idea that the timing of the deposit was a problem. Deposits of size had never been held before (or I would have received written notice as is required. Right?). Maybe I'm just lucky that it hadn't happened before in 30 some + years. Don't know.

<<<The Reg clearly states the conditions under which they can hold deposits and yours met several of them (size, new account, perhaps not personally presented to bank).>>>

But, they weren't REQUIRED to hold by fed bank rules as they told me. They "could" and did. size? (5-6 figures/and not unusual; new account?/the regs address NEW CUSTOMERS which I am not; pesonally presented?/at drive through window which is my routine. I'm guessing that the window is considered personally presented. We can certainly speak to each other at the drive through and do do that. I'd be surprised if it weren't considered personally presented.

Anyway, I'm going to find out how fast the check cleared and will be interested in what you think if it cleared fast and was still held for the remainder of time allowed.

I should have been more careful under the circumstances I guess, but it just didn't occur to me.

Cancelling the old account and opening a new account was done to be cautious. That took the better part of 2 days including photo ID faxed to the bank from an out of state spouse. I AM generally looking out for what CAN go wrong. I just plain missed this one.

So I'll take some responsibility. But, an apology from the bank rep would have gone a LONG way, too. I understand HOW it happened, but that doesn't make it right in my book. Then, insult to injury...they claimed the fed rules MADE them do it; IOW, they deflected ANY responsibility. From my point of view, the bank screwed up. But, I didn't help them out any either ... by NOT pointing out the new account/OLD customer thing. Another lesson learned the hard way.

If you don't mind, I'll post to you when I learn details of when the check cleared vs when the deposit was made available.

Thanks for your input on this.

Lethean





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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71644 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 10:36 AM
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ira

Sorry to bother you again. But, I just spoke with the comptroller who issued the check to us. She looked up the clearing date of that check.

I deposited the check 4/14...it cleared her bank 4/15. The deposit was held by my bank until 4/22.

What do you think???

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71645 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 11:22 AM
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Sorry to bother you again. But, I just spoke with the comptroller who issued the check to us. She looked up the clearing date of that check.

I deposited the check 4/14...it cleared her bank 4/15. The deposit was held by my bank until 4/22.

What do you think???


What I think, but do not know, is that once the hold is placed on the check/deposit, they wait for the time to elapse, regardless of whether the funds have cleared or not.

That's not to say that an alert or helpful manager, who already knows that there's a potential problem since you've been inquiring, couldn't/shouldn't have released the funds as soon as they cleared. I think you've gotten some shoddy (even if according to their rules legitimate) treatment.

Ira


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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71646 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 11:48 AM
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ira

<<<That's not to say that an alert or helpful manager, who already knows that there's a potential problem since you've been inquiring, couldn't/shouldn't have released the funds as soon as they cleared.>>>

And there's the rub...they didn't know because I didn't inquire until 4/22...too late for them to be of help. They said if they had known earlier, they might have been able to research/intervene.

The lesson learned...if all the worst parameters are met/taken on Reg CC...deposits can be held for up to 11 days, I think. I'll be keeping that in mind from now on. Ugh.

Thanks again for your input.

Lethean



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Author: herbfr Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71651 of 121189
Subject: Re: bank bounced check to irs Date: 4/26/2004 7:24 PM
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Seems to me that your accountant's advice is unwise. Knowing that you will be charged monthly interest by the IRS, why wait (for who-knows-how-long) for them to notify you of the bounced check? If it were me, I'd send a letter explaining what happened and include a new check. Then check with your bank daily to see if either of the 2 checks has cleared. The moment one of them clears, place a stop on the other one.

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