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  • safety of demand drafts

    Scenario:

    1. Suppose I want to pay $50,000 to the US Treasury for my 2011 taxes.
    2. I go to Citibank and ask for a demand draft for $50,000 made out to the Department of the Treasury.
    3. I send the draft to the Treasury Department.
    4. The Treasury Department cashes the check.
    5. The Treasury Department writes me to say they never received the check and that I still owe the $50,000.

    According to a consultation with staff at my local branch of Citibank, in this scenario the bank would have no way to confirm to me in writing that the check had been cashed. They say the canceled check would never return to Japan and that they would have no access to it, so they could not give me a copy.

    So in this scenario, I would have no choice but to pay a second $50,000 to the IRS.

    This seems absurd--part of the point of a check is being able to prove that you paid--but this is what Citibank Japan is telling me. Does anyone have any helpful comments (aside from complaints about Citibank)? I just chose $50,000 as a nice round number.

    Thanks.

  • #2
    Originally posted by tepa View Post
    Scenario:

    1. Suppose I want to pay $50,000 to the US Treasury for my 2011 taxes.
    2. I go to Citibank and ask for a demand draft for $50,000 made out to the Department of the Treasury.
    3. I send the draft to the Treasury Department.
    4. The Treasury Department cashes the check.
    5. The Treasury Department writes me to say they never received the check and that I still owe the $50,000.

    According to a consultation with staff at my local branch of Citibank, in this scenario the bank would have no way to confirm to me in writing that the check had been cashed. They say the canceled check would never return to Japan and that they would have no access to it, so they could not give me a copy.

    So in this scenario, I would have no choice but to pay a second $50,000 to the IRS.

    This seems absurd--part of the point of a check is being able to prove that you paid--but this is what Citibank Japan is telling me. Does anyone have any helpful comments (aside from complaints about Citibank)? I just chose $50,000 as a nice round number.

    Thanks.
    I believe that Certified Checks are returned to the issuing bank. Why are you not asking Citibank to help you solve your problem - that of confirming that the IRS cashed a check?

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    • #3
      Yes, checks are returned to the issuing bank, but, as I noted in my post, Citibank Japan told me that they have no way to verify that a check has been cashed. When I said that surely they must at least be able to confirm that the check has been cashed, they replied that there is no way they can do this. And they said they do not have access to the cancelled checks. I said, "So anyone who receives a Citibank demand draft can cash it but then claim not to have received it and demand repayment, and the person who made the payment will have no choice but to pay a second time." "Well, if the check is lost, you can put a stop payment on it, but you can't confirm that it was cashed." It still seems that this must be wrong, but this is what two Citibank employees have now told me.

      Comment


      • #4
        Originally posted by tepa View Post
        Yes, checks are returned to the issuing bank, but, ...
        Again - you are restricting the possible solutions to demand drafts. Why not ask them for a different product - one that will return a receipt to you for your records, and one that only the payee can cash?

        Demand drafts do not do this, neither would sending cash in an envelope... but what would?

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        • #5
          Citibank originally suggested a wire transfer, but the IRS only accepts these if you register in advance for its special online secure payments program, which (aside from requiring cooperation of the foreign bank) would require a time-consuming snail-mail registration process, and in any case only works for people who use Windows (I don't). I have to pay right away, so a demand draft was the only available option. I'm still hoping Citibank will find a way to grant verification in the unlikely event that IRS loses track of the payment. (Maybe someone out there can cite a precedent for getting such a verification from Citibank?)

          Comment


          • #6
            Originally posted by tepa View Post
            "Well, if the check is lost, you can put a stop payment on it...
            How about doing that then? You might get what you wanted to know.

            'I'm sorry we can't stop payment, it has already been cashed.'
            (unless of course you're expected to prove it has been lost, kinda like proving a negative...next to impossible)

            Comment


            • #7
              Originally posted by tepa View Post
              Scenario:

              1. Suppose I want to pay $50,000 to the US Treasury for my 2011 taxes.
              2. I go to Citibank and ask for a demand draft for $50,000 made out to the Department of the Treasury.
              3. I send the draft to the Treasury Department.
              4. The Treasury Department cashes the check.
              5. The Treasury Department writes me to say they never received the check and that I still owe the $50,000.

              According to a consultation with staff at my local branch of Citibank, in this scenario the bank would have no way to confirm to me in writing that the check had been cashed. They say the canceled check would never return to Japan and that they would have no access to it, so they could not give me a copy.

              So in this scenario, I would have no choice but to pay a second $50,000 to the IRS.

              This seems absurd--part of the point of a check is being able to prove that you paid--but this is what Citibank Japan is telling me. Does anyone have any helpful comments (aside from complaints about Citibank)? I just chose $50,000 as a nice round number.

              Thanks.
              I guess the check would end up at the paying bank in the USA, probably Citibank. Maybe you should call them.

              On an optimistic note, last year the IRS said that I hadn't paid my taxes and they were going to freeze assets, etc., but since I had paid with a personal check the proof was easily obtainable. I told them that and in just four short months they wrote that I was right. No apology though. So, maybe they will discover their error.

              Comment


              • #8
                Success

                The outcome: I spoke to two people at my Citibank branch. Both said: no, we have no way to officially confirm that a bank draft has been cashed. But then I called the Citibank information line and was told that "probably" there was no way to help me, but that they would get in touch with the branch and double check. I then got a call and went down to the branch to speak to someone who seemed to be higher up in the chain of command. She said the bank had in fact two different ways of helping me. And yes I could get a copy of the cancelled check if necessary, though it might take a little time--and free of charge, no less. So being persistent paid off in this case.

                Thanks for everyone's suggestions.

                Comment

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