Two weeks ago we warned readers who wanted to get 2009 tax refunds to file their taxes asap. It appears we were prescient. The state budget crisis is about to hit home. Again. Last year California delayed tax refunds due to simply not having any money which to refund. This year, the first states to announce a hold in refund processing for just the same reason are Hawaii and North Carolina. New York State is also considering a comparable action. If you have delayed filing your taxes, it is high time to do so now regardless of where you live as the same "money-saving" approach of halting refunds is likely about to become prevalent now that "everyone is doing it."
Death and taxes may be life's only certainties, but many taxpayers won't be able to count on a timely income tax refund this year, as struggling states impose delays on refund checks to help solve their budget crises.
As New York weighs a potential delay, two other cash-strapped states, North Carolina and Hawaii, have already announced they will put a hold on refunds until June and July, respectively, allowing them to retain funds longer and cover their budget shortfalls with hundreds of millions of dollars owed to individuals and businesses.
The move will allow Hawaii to reallocate the $275 million it saves in the short run to balancing its $721 million deficit. North Carolina's Department of Revenue, now in its second consecutive year of refund delays, said slow collection of taxes contributes to the delays -- and hurts an already $1 billion shortfall.
"We are managing the cash flow very carefully," North Carolina Revenue Secretary Ken Lay told the state's News and Observer newspaper. "We are managing the distribution of refund checks as well."
The refund halt will only apply to filings filed going forward, with existing refunds likely to be processed.
Both New York and North Carolina point out that delays will not apply to those returns that have already been filed. New York has paid out $293 million in refunds so far to 281,000 taxpayers; North Carolina has issued more than $400 million.
But protest rages on, as the majority has yet to file.
Yet the sorry state of affairs in Wall Street host New York is the punchline here: it appears that not only will a refund halt be instituted by Governor Paterson, but far more draconian measures may be in store for New Yorkers.
A potential delay in sending out tax-refund checks would help the state from going broke before the end of the fiscal year, April 1.
The state faces a $1.4 billion deficit for the remainder of the fiscal year and is expected to delay aid payments next month to cover about $20 billion in bills for programs and services.
But Gov. David Paterson's office stressed it has not yet determined what aid payments would be deferred — or whether the tax-refund checks would be delayed.
In a quid pro quo, we expect various tea party activists to take to the streets demanding a commensurate change to the April 15 tax filing deadline.