7 States that Still Owe their Citizens Refunds

Last week the Roni Deutch Tax Center – Tax Help Blog posted a great new article on the seven states that still owe their citizens refunds. The list includes Hawaii, New York, and North Carolina, among others. You can find a snippet of the article below, or read the full story here.

1. Iowa

Like many local governments, the state of Iowa has had their fair share of financial problems due to the recession. Fortunately, the largely agricultural state has managed to bounce back rather quickly compared to other struggling states. In order to get their budget in check, Iowa has used a number of tactics to cope with their financial problems, including a slight delay in the payment of tax refunds. The state’s revenue department is now assuring taxpayers that they have begun processing returns and will mail out refunds as soon as possible. If you are an Iowan taxpayer still awaiting the arrival of your tax refund, click here to check its status.

2. Rhode Island

Thousands of taxpayers in Rhode Island have been patiently waiting for their tax refund. When the residents were told their tax refund might not arrive until the end of the fiscal year, so many taxpayers became upset and the state legislators have introduced a bill that would move up the late-interest fee date—the taxpayers will now get compensated for the inconvenience.

3. Hawaii

Hawaii's economy was hit hard in the recession. The state’s unemployment rates are at the highest levels in over 30 years and personal bankruptcy rates have soared. Hawaii has long been considered one of the best vacation spots in the country, but tourism has slowed down since the recession began and the state government was forced to delay payment of state tax refunds due to a lack of revenue. Fortunately, the local economy is improving and the state government began sending out refunds at the end of May. Residents of Hawaii can visit this site to see the status of their refund.

Some States Delaying Tax Refund Payments

From CBS News.com:

Some states suffering severe, recession-induced budget problems are holding off on paying tax refunds to individuals and businesses. North Carolina, Hawaii and Alabama are already doing it and others, such as New York and Kansas, might.

The states are holding or may hold onto your money as long as they can because they need to use it for other purposes, tax expert and attorney Barbara Weltman told "Early Show" Saturday Edition" co-anchor Chris Wragge.

You'll eventually get your refund, but when depends on where you live, she explained. Laws differ from state-to-state, but most states have to issue a check (or direct deposit) within 45 days from April 15 or the date the return was filed, whichever is later. So, if you filed your return in February, the refund isn't due until 45 days after April 15. Some states have even longer — up to 90 days — to issue the refunds without having to pay interest.

Weltman says she sees this becoming a long-term problem because, even if the economy recovers, many states will have huge leftover budget gaps. "I think the best strategy for tax payers is to avoid the need to get a refund — which is really just an interest-free loan you've made to the government," she observed.

California Revenue Jumps, Tax Refunds Should Be Paid on Time

Last year, my home state of California had to delay refunds to taxpayers because of budget problems, and many have been worried that the same would happen again this year. However, State Controller John Chiang has put everyone’s worries to rest by announcing that the state’s revenue is higher than what the governor had predicted and that there would be no reason to withhold taxpayers’ refunds.

According to this Reuters article, California's revenue in February was $480 million or 8.7 percent above the estimate in Governor Arnold Schwarzenegger's state budget plan.

There had been some talk in the state capital of Sacramento that tax refunds could be delayed, as they were temporarily last year, to help the state government preserve cash while Schwarzenegger and lawmakers tackle closing a state budget gap of $20 billion.

The state's cash position, however, is better than expected, according to Chiang's office.

"Revenues came in above projections for the third month in a row, continuing a positive trend that shows California is on the road to recovering from the recession," Chiang said in a statement.

"Given February's numbers and recent action from the Legislature to improve the state's cash flow, Californians should expect to receive their hard-earned tax refunds on time," Chiang added.

The controller, as he routinely does, urged a speedy budget agreement that balances the state government's books, something that Wall Street rating agencies, which have the state's credit rating just a few notches above "junk" status, would also like to see.

Continue reading Reuters.com…

California May Delay State Refunds for 30 Days

From the Sacramento Union:

California’s controller said Friday he will be forced to impose a 30-day delay on tax refunds and some other payments starting Feb. 1 if lawmakers fail to agree on a plan to erase a nearly $42 billion budget deficit.

Controller John Chiang, who acts as the state’s accountant, said he will have no choice but to delay $3.7 billion in payments next month because the state is running out of cash.

Doing so, he said, would buy the state a few more weeks before its accounts run dry. The state is on the brink of issuing IOUs as it faces a $41.6 billion shortfall over the next year-and-a-half.

“Let me make this perfectly clear: This is a painful decision,” Chiang said during a news conference in Sacramento. “It is an action that is critically necessary. The fallout from issuing IOUs, or for the state going into default, are significant and long-lasting and something to be avoided at nearly all costs.”

A severe drop in revenue from sales, property and capital gains taxes has left the state’s main bank account depleted. The state has not had a positive cash balance since July 12, 2007, Chiang said.

The state had been relying on borrowing from special funds and Wall Street investors, but those options are no longer available. Democratic and Republican legislators and GOP Gov. Arnold Schwarzenegger have been at odds for months over to fix the budget gap.

Chiang said his office must continue $6.6 billion in education and debt payments next month but will defer money for tax refunds, student aid, social services and mental health programs.