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Overdraft: personal record and suggestion


DizRotus

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Some years ago, a PNC banker suggested using a checking account dedicated to online tax payments -- or refunds.  The account costs us nothing.  The thinking is that you don't want the government, state or federal, to have easy access to your regular business checking account.  A mistake regarding a primary checking account could cripple a small business and create a cash flow nightmare.  I'm extremely glad I took his advice.  From now on I'll use this same dedicated business checking account for personal tax liabilities or refunds.  The convenience of automatic debits or credits is real, but the danger is realer. 

 

The business checking account dedicated to taxes is maintained with a $1,600 balance.  Each month the payment of sales tax and employee withholding is done online.  The amount of the payment is transferred online from the primary checking account to the secondary "tax" account.  The payment this month was $3,090.48 to be withdrawn on Thursday July 20.

 

On Thursday morning I went to the online banking site to monitor my financial empire.  The caffeine had not yet kicked in when I saw that the secondary account was overdrawn.  My initial thought was that I'd forgotten to schedule the $3,090.48 transfer.   No, the transfer was scheduled for the correct date and amount.  As the sleep fell from my eyes and the coffee worked its magic, reality set in.

 

Before clicking on the attached pdf of a payment to the State of Michigan for sales tax and employee withholding, take a guess at the amount of the overdraft it caused.  I guarantee you will be low.  I quickly called  the bank and State of Michigan.  Miraculously, I was able to quickly get through to patient courteous people at both places.  The whole mess was resolved in a few days.

 

As a joke, I called my brother to ask him if he could temporarily lend me enough to cover an overdraft.  He smelled a rat, as he knows I would never ask him for money.  When he heard the details he laughed out loud, and said he wouldn't have been able to help.

 

Moral of the story,  only let the government have access to an account dedicated to that purpose .

 

071617_erroroneous_payment.pdf

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The state just refused to renew my car plates, said I owed them tax money.

 

Of course they were wrong, but the hassle to correct their mistake was a huge time waster, and my plates were going to expire (which would have caused armed thugs in blue costumes to hassle me).

 

 

 

 

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2 minutes ago, djk said:

The state just refused to renew my car plates, said I owed them tax money.

 

The good news there, is that if taxes are truly unpaid, eventually you'll be in a position to make your own license plates.

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Glad things worked out.

 

I do all the payroll and book keeping for my wife's business.  We have the exact same type of account setup for the taxes and any other payments we wish to isolate.  We have had similar incidents where mistakes were made and isolated to these accounts so nothing affected where the real money resides.  A very good idea.

 

 

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