Much-needed tax refunds delayed / LJWorld.com

Archive for Saturday, July 4, 2009

From Kansas to California, states months late making some payments

By Greg Bluestein - Associated Press Writer

July 4, 2009

Atlanta — Colin Daymude was out of work last year after his business failed and eagerly filed his taxes in mid-January, figuring he’d get his refund sooner. He was wrong.

It took the 44-year-old entrepreneur more than six months to get his $1,300 check — money that he needed to pay living expenses while he worked a few side gigs.

Tax day — April 15 — has long since come and gone, but sharp budget cuts and falling revenues have forced many states to delay income tax returns for months — and left taxpayers longing for their money.

“I’m just trying to get my money back,” said a frustrated Daymude. “It’s my money anyways.”

Some states say plummeting tax collections drove them to hold on to the money so they can make ends meet. Others complain of not being able to keep up because the economic downturn has forced staffing cuts in revenue departments.

But critics worry governments are withholding funds that rightly belong to taxpayers when they need the extra cash the most. And some of the tardy states are fast approaching a stiff deadline of their own: The longer they wait, the more likely they’ll have to pony up interest from thinning state coffers.

That prospect could soon become a reality in Georgia and Alabama, where tax officials are racing to beat a mid-July deadline to send hundreds of thousands of tax refunds or risk racking up millions of dollars in interest.

“I know some of the taxpayers are wondering if the state is going to pay the refund,” said Carla Snellgrove of the Department of Revenue in Alabama, where more than 120,000 taxpayers are waiting for at least $63 million in income tax refunds.

“You talk with them and assure them they’ll get the refund, it’s just much slower this year,” she said. “And if we don’t meet the July 15 deadline, then the state will pay interest — that provides them some assurance.”

The funding problems have become familiar in cash-squeezed states.

California, which faces a deficit that could top $24.3 billion, may have to issue about $3 billion worth of promissory notes this month to state contractors, college students and taxpayers owed refunds unless there is a budget-balancing agreement.

Smaller states have also had trouble. Freda Warfield of the Kansas Department of Revenue said tax officials are hoping to send out $31 million in refunds by next week — but she knows residents are getting anxious. The returns average $500 a person.

“The revenue receipts have just been down,” she said. “There’s not enough coming in to issue all of our refunds. Tough decisions needed to be made, and one of the things that we could do is to hold our refunds.”

It quickly became a touchy subject there, where thousands of people still haven’t gotten refunds. Republican state Sen. Jeff Colyer said he raised the alarm that the state may not be able to make the payments back in August.

“It’s unfair to taxpayers,” said Colyer, a surgeon from Overland Park. “It’s creating a cash-flow concern for these people. They rely on tax refunds for a big purchase, or to make a house payment. People have already budgeted how that money will be spent.”

Other states have had to be a bit more inventive.

Missouri, which delayed issuing income tax refunds earlier this year, ultimately used $250 million of federal economic stimulus money to pay hundreds of thousands of refunds.

Discussion

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4 July 2009
at 7:32 a.m.

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lee_go_hawks (Anonymous) says…

Haven't gotten my state refund yet. I think I should charge some interest.
4 July 2009
at 7:56 a.m.

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xbusguy (Anonymous) says…

lee_go: We both know if was the other way around, you would be charged interest…. and penalty. What's good for the goose is good for the gander.
4 July 2009
at 7:59 a.m.

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KU_cynic (Anonymous) says…

Here's a prediction: starting this year taxpayers will take notice of these delays and start adjusting their withholdings — perhaps to the point of purposefully underwithholding — resulting in a further drag on state tax collections.

Isn't there something inherently unfair in a governmenr that penalizes underwithholding by taxpayers (even with eventual payment come April 15th) and that yet delays “refund” of over-withholdings?
4 July 2009
at 9:11 a.m.

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jackpot (Anonymous) says…

Hey lee-go-hawks as I remember a story interest starts on July 1.
4 July 2009
at 10:23 a.m.

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notajayhawk (Anonymous) says…

KU_cynic (Anonymous) says…

“Isn't there something inherently unfair in a governmenr that penalizes underwithholding by taxpayers (even with eventual payment come April 15th) and that yet delays “refund” of over-withholdings?”

If I remember the earlier story on the Kansas delay, the refunds that were being held were for returns that were either filed late or had errors.
4 July 2009
at 1:23 p.m.

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SettingTheRecordStraight (Anonymous) says…

Time for the complete elimination of the IRS along with the millions of dollars and billions of hours wasted filling out tax document.
4 July 2009
at 1:52 p.m.

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notajayhawk (Anonymous) says…

STRS;

While I may not disagree with that sentiment, this story isn't talking about the IRS. It's about *state* tax refunds.